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PRESENTED BY 



Complete Proceedings 



OF THE FIRST 



National Business Congress 

A Free and Open National Forum of 



Industrial, Commercial and Financial Interests 



UNDER THE AUSPICES OF 



The National Business League of America 



GOLD ROOM, CONGRESS HOTEL, CHICAGO 
December Eleventh, Twelfth and Thirteenth 
Nineteen Hundred and Eleven 




ISSUED BY 

THE NATIONAL BUSINESS LEAGUE OF AMERICA 

Chicago Stock Exchange Building 
CHICAGO, U. S. A., 1912 



^ 



tfV 



PRESS OF 

STROMBERG, ALLEN & CO. 

CHICAGO 



Gift 

Publisher 
FEB 'a 1911 



FOREWORD 



THE National Business Congress was called by 
the National Business League of America, as the 
result of a conference of leading national and 
local industrial and commercial organizations, for the 
free and open discussion of questions of vital im- 
portance to business interests, for the purpose of 
ultimately finding a common ground upon which to 
insure a unity of action in the promotion of such 
reasonable and sane legislation as would, in the judg- 
ment of practical men, be beneficial to the industries, 
commerce and finance of the United States. 

There was no intention of organizing another 
political party. Already there are too many such in 
existence for the general welfare. It was the special 
aim of the Congress, however, to encourage business 
men everywhere to become active in political fields, 
but, as already indicated, only for the purpose of 
securing wise enactments for the public good; for 
the repeal or amendment of harmful, inadequate and 
unnecessary laws, and for the prevention of premature 
and ill-advised legislation generally. 

The Congress adjourned after empowering the 
Chairman to appoint a Resolutions Committee to 
consider the proceedings of the different sessions, and 
to draft a platform covering the various measures 
considered; the same to be submitted for the approval 
of the organizations represented, and of other active 
bodies throughout the country. 



INDEX TO ADDRESSES 



OPENING ADDRESS. 

George W. Sheldon, President of the National Business 

League of America 5 - 8 

TARIFF, TRUSTS AND POLITICS. 

Alexander H. Revell of Illinois 9 - 22 

THE NECESSITY FOR THE BUSINESS MAN IN POLITICS. 

Henry M. Wallis of Wisconsin, Chairman of the State 

Legislation Committee of the National Implement 

and Vehicle Association 23 - 33 

HOW TO GET A MERCHANT MARINE. 

Benjamin J. Rosenthal of Illinois 34 - 52 

THE AMERICAN CONSULAR SERVICE. 

Dr. Samuel MacClintock of Illinois 55 - 73 

THE RELATION OF INDUSTRIAL ABUSES TO OUR FOR- 
EIGN AND DOMESTIC TRADE. 

John Kirby, Jr., of Ohio, President of the National 

Association of Manufacturers 75 - 93 

COMPULSORY INSURANCE. 

Frederick Townsend Martin of New York 93-105 

AMENDMENT OF THE SHERMAN ANTI-TRUST LAW, TO 
PROTECT LEGITIMATE COMBINATIONS OF LABOR 
AND CAPITAL. 

Honorable Frank D. Pavey of New York 112 - 140 

TRANSPORTATION. 

Frederic A. Delano, President of the Wabash Rail- 
road Company 155 - 165 

OUR REFORMED CONSULAR SERVICE AS AN AGENCY IN 
AMERICAN TRADE EXPANSION. 

Honorable John Ball Osborne, Chief of the Bureau 
of Trade Relations, Representing- the Department of 

State at Washing-ton 166-188 

ELASTIC CURRENCY FOR THE PEOPLE, STABLE, FLEX- 
IBLE, RECONVERTIBLE. 

E. Clarence Jones of New York, President of the 

American Embassy Association 190 - 211 

THE AMERICAN MERCHANT MARINE IN OUR FOREIGN 
TRADE. 

Robert Dollar of California 218 - 220 

THE PACKING INTERESTS. 

Jacob C. Dold of New York 250-255 

THE CONSULAR SITUATION. 

Austin A. Burnham, General Secretary of the National 

Business Leagne of America 256 - 266 

MEASURES FOR THE PROMOTION OF THE AMERICAN 
MERCHANT MARINE. 

Professor Emory R. Johnson of the University of 

Pennsylvania 268-280 

PRESSING NEEDS FOR CURRENCY LEGISLATION. 

George M. Reynolds, President of the Continental and 

Commercial National Bank of Chicag-o 280 - 300 

THE RESTORATION OF OUR COMMERCIAL FLAG TO 
THE HIGH SEAS. 

James L. Ewell of New York, Secretary of the 

National Merchant Marine Association 301 - 315 

HOW TO INCREASE OUR EXPORTS. 

Benjamin J. Rosenthal of Illinois 316 - 324 



National Business Congress 



FIRST SESSION. 

Chicago, Monday, December 11, 1911 
10 :30 o'clock A. M. 



The Congress was called to order by Mr. George W. Sheldon, 
President of the National Business League of America. 

President Sheldon : Gentlemen, this is a congress of busi- 
ness men, called by the National Business League of America, con- 
sistent with its constitution and activities, to discuss important 
national matters which it believes are vital to the welfare of the 
country; to deduce from the discussions, theories and principles 
which will result in the adoption of resolutions directed, if you 
please, to our legislators, with such recommendations and addenda 
as are deemed necessary for the proper laying before our legislative 
bodies the conclusions reached by this Congress. 

Attending this Congress are men from nearly every state in the 
Union, and, so far as I know, not a single man who has any political 
strings attached to him, and is, therefore, free to voice his opinions 
in the most effective way, and I think I may safely add in as em- 
phatic manner as he shall feel the subject warrants. 

I remarked that the subjects for discussion are vital to the wel- 
fare of the country — they are : 

Tariff, trusts and politics. 

Measures for the creation of an American Merchant Marine 
and restoration of our Commercial Flag to the High Seas. 

The necessity for business men in politics. 

The American Consular Service. . 

The relation of industrial abuses to our foreign and domestic 
trade. 

State Insurance. 



6 NATIONAL BUSINESS CONGRESS 

Amendment of the Sherman Anti-Trust law to protect legiti- 
mate relations of labor and capital. 

Transportation. 

Promotion of American foreign commerce. 

Elastic currency for the people — stable, flexible, re-converti- 
ble. 

Pressing needs for currency legislation. 

How to increase our exports. 

I think you will all agree with me that when I said the subjects 
for discussion are vital to the welfare of our country, I was not far 
wrong. If we admit that these are all subjects which are vital, we 
have agreed on the initial efforts of this Congress. Every man in 
this room is sufficiently familiar with all these subjects so that he 
has opinions thereon, and I venture to say that the crudest of these 
views, if enacted into law, would be better than most laws which 
now burden our statute books in relation thereto. 

Your work, therefore, for the next three days, is cut out for 
you, and on you depends the impression which you will make upon 
the country and our legislators. Personally, I feel that the result 
of this Congress will be greater and more beneficial to our country 
than any congress of business men that has ever been held. 

There are two subjects in the list in which I am particularly 
interested : they are Consular Reform and Merchant Marine. I say 
that I am particularly interested in these subjects, and I am further 
frank to say that my interest in these subjects is both selfish and 
patriotic. Selfish, because I come in daily contact with both in the 
earning of my daily bread ; patriotic, because I am an American born 
citizen, and I see abuses in the first which are easy of reformation, 
if our legislators will abandon their personal and political interests 
and work for the interests of the country at large, which they 
pledged themselves to do in their solicitation for votes which elected 
them to the offices which they now hold, and patriotic because I see 
hundreds of millions of dollars per annum paid to foreign countries 
to provide transportation for the carrying to all parts of the world 
of the raw and manufactured products of this great country. But 
both of these subjects are to be discussed during this Congress by 
men who are much more competent to lay the facts and the situation 
before you than I am able to do. You will hear but little from me 
during this Congress, because of the fact that it was instituted for 
the purpose of the promulgation of the ideas of you captains of in- 



NATIONAL BUSINESS CONGRESS 7 

dustry, commerce and finance from different parts of the country. 
It is my intent, however, to mingle with you for the purpose of col- 
laboration with a view to bring about better administrative condi- 
tions than exist at the present time. 

Just one more word about Consular Reform : The files of the 
National Business League of America are full of autograph letters 
of prominent Senators and Congressmen who have eulogized our 
efforts, who have promised heartiest support, and who have not 
even turned their heads once to make good. These are no idle 
words — they are facts which can be proven by our records, which 
are open to each and all of you. 

I recall an incident of some three years ago, when a committee, 
made up from the membership of the Chicago Association of Com- 
merce and the National Business League of America, visited Wash- 
ington to urge upon the Congress their support to the proposition 
for a Tariff Commission. This committee called upon the Speaker 
of the House, and were very thoroughly disciplined by him and were 
practically advised that they were interfering with a matter which 
they knew nothing about, and that the Speaker and the Congress 
were quite competent to look after the tariff affairs of this country. 
The morning after this very unsatisfactory visit, the committee 
called upon President Roosevelt. He listened patiently and inter- 
estedly to the story which the committee had to relate. The com- 
mittee urged upon the President to send a message to the Congress 
recommending enactment of a law providing for a Tariff Commis- 
sion. The President answered: "You all know the fate of the 
various messages which I have sent to the Congress during recent 
weeks. Were I to send a message to the Congress recommending 
the enactment of a law providing for a Tariff Commission, it would 
suffer the same fate as have other messages which I have sent to the 
Congress ; but," he said, "when you get home remember that there 
is an election coming." Now, there is not a subject to be discussed 
by this Congress but that involves a measure which is for, and if 
enacted into law, will be for the well-being of the country. If 
these measures are turned down by our legislators, remember there 
is an election coming, and see to it that those legislators to whom we 
shall appeal in vain are retired to the shades of private life. 

During the last fifteen years, however, much has been accom- 
plished by the business organizations represented in this Congress. 
The creation of a Department of Commerce and Labor ; the progress 



8 NATIONAL BUSINESS CONGRESS 

in consular reform and in the movement for a permanent Non-parti- 
san Tariff Commission;. Purchase of American Embassy and consu- 
lar sites and buildings ; a national irrigation law that is rapidly trans- 
forming the desert wastes west of the Mississippi into a vast empire 
of agriculture and home builders ; and to crown our efforts with im- 
perishable credit, the Panama Canal, soon to be a great commercial 
highway for America and all the nations of the earth. These 
achievements demonstrate what business men and business organi- 
zations in politics can do when they all pull together. The results 
indicate what may be accomplished in the future, if, through confer- 
ence and co-operation, we persist for the enactment of wise laws 
and for the defeat of bad and unnecessary measures. 

Gentlemen, one word as to organization. If you feel that you 
would like to have an organization Chairman, Secretary, etc., we 
shall be very glad to have you organize in that way. What are your 
views on that subject? 

Mr. W. H. Stackhouse (of Springfield, Ohio) : I move that 
Mr. Sheldon be named as the presiding officer of this convention. 
(The motion was duly seconded and unanimously carried.) 

Mr. Williams : Mr. Chairman, I move you that the present 
Secretary, Mr. Austin A. Burnham, act as the Secretary of this 
Congress. 

(The motion was duly seconded and unanimously carried.) 

The Chairman : The remainder of the organization will 
come to you from time to time in the way of committees ; such 
committees as you would like to have appointed, and you will then 
have an opportunity of selecting the men that you believe to be most 
desirable for those committees. 

The Chairman here introduced Mr. E. Allen Frost, General 
Counsel of the National Business League of America, who warmly 
welcomed the speakers and delegates. Mr. Frost then presented 
statistics showing the remarkable increase of manufactures and cor- 
responding facilities for manufacture, in the United States, and 
emphasized the pressing demand for larger foreign markets for sur- 
plus American products ; mentioning the principal agencies that must 
be employed to increase our foreign trade, particularly specifying 
improved transportation facilities by land and sea, expert salesman- 
ship, an elastic currency, and a thoroughly efficient foreign service. 



NATIONAL BUSINESS CONGRESS 9 

Mr. Frost also deprecated ill-advised and ill-considered legisla- 
tion that would hamper business interests and clog the natural chan- 
nels of commerce. In conclusion, the speaker expressed the hope 
that at the termination of the Congress the delegates would be able 
to formulate the needs of business interests in such a clear and 
forceful way, in proper resolutions, that they will go a long way in 
securing from the Congress at Washington such legislative action as 
the country requires and demands, to insure an even prosperity and 
further enhance the international prestige of America. 

The Chairman : We have with us today, gentlemen, a Chi- 
cagoan; a thorough Chicagoan. Although he may not have taken 
part in the official work or the Governorship of the city, he has 
always been very intensely interested in not only municipal, but in 
State and National affairs. He is a man who, "while his com- 
panions slept, was toiling upward in the night." He has scaled the 
ladder of industrial and commercial advancement, until today he is 
at the head of one of the largest manufacturing and mercantile con- 
cerns of the kind in the West. It is my pleasure to introduce Mr. 
Alexander H. Revell. 



TARIFF, TRUSTS AND POLITICS. 



By Alexander H. Revell. 



Mr. Chairman and Gentlemen of the National Business Congress : 

America is at peace with the world. Our land is free from pes- 
tilence, strikes and famine. Crops have been abundant for a dozen 
years. Money is plentiful at reasonable rates. Enterprise is ready 
and anxious to embark on new and greater undertakings. Our re- 
sources are unlimited ; our opportunities boundless. 

But, in business, inaction rules where activity should prevail. 
Apprehension and mistrust occupy the place where justifiable opti- 
mism ought to be conspicuous. Millions of dollars of investments 
lie idle and unproductive ; millions of willing hands are deprived of a 
fair opportunity to make the effort that either now, or in the future 
will keep the wolf from the door. Every prudent industrialist in 
the country is manufacturing as nearly as possible only for orders 
actually received, instead of making or ordering ahead the finished 



10 NATIONAL BUSINESS CONGRESS 

work in sturdy confidence of future demands. American prosperity 
hesitates, and threatens to halt. What is the matter? The answer 
is easy : 

"Tariff Tinkering!" 
"Trust Busting!" 
"Political Hypocrisy !" 

The Republican party originated the present protective tariff 
system and has upheld and defended it for nearly half a century. 
During the same period, year after year, decade after decade, the 
critics of that party assailed the protective policy and went before 
the people demanding and pleading for "free trade," or, "a tariff for 
revenue only." Their efforts have failed. The earnest, well-meant 
effort of Mr. Cleveland in the direction of free trade, during his last 
term of office, brought about his own personal repudiation by his 
party, and permitted the upcoming of Mr. Bryan with his free silver 
nostrum in 1896. 

I am not prepared to say that there are not defects in the Ameri- 
can tariff schedules. Nothing that comes out of the hand or brain 
of imperfect man can be expected to be free from human defects. 
And, when a tariff schedule is adopted which is the result of the 
effort of one, and of the opposition of another, it may be expected 
that it will represent compromise of right with wrong, rather than 
the realization of idealism. 

Another thing: Whatever its defects, the American people 
have established a method of living under our tariff system practi- 
cally as the system exists today. That is to say, every business is 
adjusted to every other business — each is fitted to all, and all to each. 
Our commercial system rests upon confidence, and confidence is 
simply belief in the stability of existing conditions. Changes in the 
tariff schedule, no matter how well sustained by theoretical justice, 
must of necessity operate to disturb the established relationships of 
all industrial products one with another. When probably every im- 
post duty in the entire tariff schedule is objected to and asked to be 
revised downward, or upward, by somebody or another, it may be 
expected that business action will await results. 

The evils of "tariff tinkering" are not wholly in the changes 
which actually may be made in the rate of duty ; for, once a change 
is made, business conditions adjust themselves according to the new 
method of living. It isn't the actual changes : it's the apprehension 



NATIONAL BUSINESS CONGRESS 11 

of possible changes — the waiting to know — preparedness for the 
worst. Mr. Kipling, in one of his best poems, portrays the despera- 
tion of waiting: 

"What makes the soldier's heart to penk, wot makes 'im to perspire? 

It isn't standin' up to charge or lyin' down to fire: 

But it's everlastin' waitin' on a everlastin' road, 

For the commissariat camel and his commissariat load." 

It isn't accomplished tariff changes that business fears, it's the 
everlastin' "tariff tinkering" that ends in no results for those who 
demand revisions, but which makes business halt and stand waiting 
for fear something awful may happen. And, this does not mean 
that only those business concerns that may be hit by a tariff reduc- 
tion wait for the blow to fall. It is as much a fact that those con- 
cerns which will be benefited, wait, for they cannot afford to manu- 
facture stocks of goods or material, which, later on, they may pro- 
duce at less cost. 

Business is tied together — all its elements are interdependent. 
You might as well try to take a foot out of an Atlantic cable, a sec- 
tion out of a Brooklyn bridge, a stone out of an arch, or a rail out 
of a railroad, as to change one schedule without affecting another 
business. More than people realize, prosperity is a matter of busi- 
ness unity — not of conflict — not of uncertainty — not of failure here 
and success there. 

Industrial uncertainty and inaction results in non-employment of 
wage workers. This means reduced consumption ; and, this, again, 
operates to retard business generally. The ear of honest ignorance is 
too receptive to the agitator who makes it appear that the hardships 
of labor brought on by "tariff tinkering" are only to be relieved by 
more "tariff tinkering," and more, and more. 

It is not strange that the unscrupulous agitator who cares for 
nothing but popular support should seek to mislead the ill-advised 
public. It is not strange that the ofttimes vanquished enemies of 
protection should clamor for tariff revision, and their clamor may 
be sincere. Were it not, however, for possibilities of agitation some 
politicians would have little excuse for political existence. And 
there are those who think that the present administration and Re- 
publican leaders are laying themselves open to the charge that they 
have become renegades to the faith that made their leadership pos- 
sible. 

But, again, this is not saying that our tariff schedules are per- 
fect, or nearly perfect. I am not prepared to say that there should 



12 NATIONAL BUSINESS CONGRESS 

not be a more or less sweeping revision. But, whatever is done 
should be done for the good of business — not for the benefit of poli- 
tics or politicians. Some of our industries, protected in their in- 
fancy by the tariff, have grown strong and powerful and monopo- 
listic. The true theory of protection is to uphold and encourage a 
feeble industry until it can hold its own against the world. After 
that it would seem that it needs but little protection. 

It is difficult, without saying over-much, to enter into a discus- 
sion of specific remedies for tariff inequalities. Perhaps the exist- 
ing tariff commission can be expanded from a mere advisory body 
into an administrative commission. Without having reached a hard 
and fast conclusion, it seems to me that a tariff commission, some- 
what like the Interstate Commerce Commission, empowered to ad- 
just tariffs, one with another- — the same as railroad rates are now 
adjusted — might meet requirements. It might be wise to make it 
possible for those who have complaints against our tariff schedules 
to appeal to such a commission instead of going before the public 
and making the tariff the football of politics. This would be some- 
what after the Canadian idea, which seems to work well. 

Whilst, therefore, admitting that the various schedules of the 
tariff from time to time should be changed by reductions, and per- 
haps by an increase, there should be a reasonable stability secured 
when once the tariff is so changed. I favor a protective tariff as 
against free trade, but this is not a discussion of the relative merits 
of the two propositions. 

It should be understood, however, that a schedule so fixed 
should stand over a period of at least ten years and probably up to 
twenty, and made almost as hard to change as it is today to get an 
amendment to our Constitution. 

The general stability of our business conditions is more import- 
ant than a change in any schedule could possibly be. 

It is barely possible that if a schedule were fixed for twenty 
years, some very great emergency might arise calling for an increase 
or a decrease after five or ten years. This is what I mean by saying 
that the emergency would have to be of a most unusual character 
before the demand would be substantially presented or considered 
for any change within the fixed term of years. 

Then there is, also, "Trust Busting !" 

In this must be included all the onslaughts that are being made 
on capital invested in large concerns. The attitude of some leaders 



NATIONAL BUSINESS CONGRESS 13 

is being emulated by the newly elected or appointed and untried 
officials in Washington, whose slogan seems to be "hit some big en- 
terprise and be immediately known." 

Sometimes action is brought under the Sherman Anti-trust law, 
the design being to break up and disorganize a business concern 
which was organized supposedly according to law, and tolerated for 
years without complaint or warning — and, with the Anti-trust law 
on the statute books all the time. Such actions to secure the disso- 
lution of combinations are brought upon the theory that if the com- 
bination is dissolved "restored competition" will insure lower prices 
to the public. 

It is true that the philosophizing of Adam Smith ushered in the 
era of competition to take the place of government regulation, 
which, at and before his time, prescribed the prices of commodities 
everywhere. And, competition was properly in order then. In 
those days when nails and horseshoes, and such things, were made 
by hand by individual workmen, competition could be relied on to be 
regulative of prices. But things are different now. Manufactured 
articles are made by machinery. Large capital, organization, and 
many workmen are required. To forbid combinations that enable 
the most economical methods of production is to make warfare on 
human advancement. 

Undoubtedly, regulation is needed. I mean especially, that sort 
of regulation which punishes act by act each violation of the rule of 
the common law that the needs of men shall not be taken advantage 
of by conspiracy to collect extortionate prices. I am not inclined to 
believe that economic combinations are ordinarily disposed to such 
a policy where a virtual monopoly has not been established. Why? 
Simply because the manufacturer realizes that to obtain for himself 
the largest net income the price must be such as to induce large con- 
sumption of the article produced. That is to say, Tie must not make 
his price so high that demand will diminish, nor so low that he will 
sell much and make but little profit. The largest of the great com- 
binations attacked by the government under the Anti-trust law have 
generally pursued this course, not perhaps, for the sake of the 
morals of it, but because it has been sound business policy to do so. 

If unrestrained promoters and unwholesome commercial pirates 
will recklessly run into law-breaking after the law is fully de- 
termined, we should treat such an offender as we would any other 
malefactor. His offense is not against a few competitors, or a few 



14 NATIONAL BUSINESS CONGRESS 

consumers. It Is against the stability of the trade of the United 
States — a menace to the peace, security and happiness which proper 
business methods will never impair. A monetary fine alone will 
not restrain the offender. A fine and imprisonment, both together, 
will be the only punishment that will make such violators of law 
stop and think. 

There is another feature of this phase of the subject: The 
action of one branch of the government is now being directed to 
breaking up combinations, so that "competition will regulate prices." 
Another branch of the government is regulating charges of railroads 
upon the theory that the competition which it is "restoring" will not 
regulate prices. Thus, it appears that the government lacks confi- 
dence in its own policies which are actually in conflict with each 
other. 

On top of all this harassment is the net income tax which per- 
mits a government agent to examine the books of every corporation, 
he seeing to it, among other things, that they are not violating the 
Anti-Trust or Interstate Commerce Law. 

The whole government proceeding is confusing and contradic- 
tory, and leads in the direction of a system of government espion- 
age of all private affairs. And, this in a country where liberty is 
not to be restrained, and only the abuse of it punished! 

In a recent widely published Hot Springs, Virginia, interview, 
the President is reported as saying that "in emergencies the govern- 
ment can raise the 1% corporation tax to 2% or 3%." Unfortu- 
nately this is too true. 

All values in this country are behind the government in great 
emergencies, and all values should be. But why call explicit atten- 
tion, with pride in the utterance, to the accomplishment of so grand 
a work, which places a part — understand a part — of industry in 
this country, that is already paying 1%, in the hands of the govern- 
ment to further assess 2% or 3%, perhaps 10% or 20% of their 
profits ? 

Why "rub it in" as the street phrase allows us to say, calling 
unnecessary attention to the instability of corporation profits, when 
he must be aware, that right or wrong, the present corporation tax 
is nothing more than class legislation — partnerships and private 
ownerships being free of such taxation ? 

Although nearly three weeks have elapsed, we have been look- 
ing in vain for some modification or denial of that part of the inter- 
view. 



NATIONAL BUSINESS CONGRESS 15 

Indirectly this strenuous zeal we are criticising, in effect, tells 
investors that they are not safe if they put their money into any 
enterprise which promises to pay more than 4%. If the political 
statesmen keep on, we will soon begin to think they are right. 

All my life I have been a Republican and have learned to look 
to the Republican party and Republican officials to safeguard the 
"general welfare." The Republican party sprang into being upon 
the great moral issue of human liberty. It conducted the war 
against Secession and, in doing so, allied with itself the business 
interests of the north. Finally, the war ended, it continued in 
power, devoting itself to maintaining the financial credit of the 
nation, the development of our industries and the extension of our 
commerce. I think you will agree with me, regardless of party 
affiliations, that a great majority of the people came to regard Re- 
publican success as an assurance of prosperous times. 

But now conditions have changed, and, as if accepting the criti- 
cism of its traditional rival as justifiable, Republican officials at 
Washington are running amuck, and the business interests of the 
country are paralyzed with apprehension lest the hand that fostered 
and protected them in the past shall strike them down in the future. 
After about eight years of crusade, wherein much excellent work 
has been accomplished, which work — permit me to say — I would 
not undo if I could, the present "trust busting" policy at Washing- 
ton lacks discretion, business discernment and common sense. It 
lacks the support of real republicans. It looks like a superabund- 
ance of legal, and a dearth of practical intelligence. 

The suits against the tobacco trust and the oil corporation were 
justifiable, and on account of most flagrant and unjust competition 
could not and should not have been avoided. They were a natural 
and proper outcome of the crusade which had gone before. It is 
hard to see, however, where the direct good is coming to the public. 
The recent suit begun against a great industrial corporation was 
merely the culmination of a series of ill-timed and ill-considered, 
seemingly political, attacks upon the greater business interests of the 
country. These assaults, if they are really sincerely devised, are 
designed to revive the conditions of competition that existed before 
the combinations were brought about. 

Even if the suits are successful it is not possible for us to go 
back to the old days of ruinous competition. We have evolved out 
of the unwholesome practice of cut-throat commercial warfare. 



16 NATIONAL BUSINESS CONGRESS 

Business intelligence and conservatism is now such that competition 
would not be carried on even if all the combinations were dissolved. 
And, the people do not want the old system. 

Do they want a railroad policy on which passengers and freight 
will have to be transferred at state lines, under which prices of 
stocks of goods will be uncertain and indeterminate? 

We hear much about "monopoly." What is monopoly? 
The Democrats in 1908 declared in effect that monopoly should be 
considered the control of 50 per cent of a given industry. Are the 
Republicans going to accept the Democratic dictum? And, what is 
to be feared from monopoly? I have already touched upon this 
point, but will add that a monopoly is dangerous, because it has the 
power to charge extortionate prices. Now then, if a monopoly 
charges excessive prices, it ought to be dealt with on the basis of 
the criminality of its specific acts of oppression. A great business 
organization should not be torn asunder and destroyed because per- 
chance some official of it might possibly, by an unlawful exercise of 
his power, demand extortionate prices. In case of monopoly we 
have regulation to fall back upon. 

In European countries monopoly, trusts, or what are called 
"groupements" in one nation and "cartels" in another, are en- 
couraged by the governments. In America the economic wisdom — 
the saving — of combinations seems to be wholly lost sight of. The 
great combination is an economic unit — the form in which pro- 
ductive results can be most economically produced, and it ought to 
be protected, as far as it is right, and not be destroyed. The great 
American industrial combinations are competing in, and conquering 
the markets of the world. If we wish to go into the laws of nature, 
we find combination. 

What has helped to make this nation one of the biggest and 
greatest on earth? It came through combination, centralization, 
economizing the cost of administration and protection. 

If the arguments which have recently been made by the latter 
day statesmen mean anything, the Louisiana Purchase should never 
have been made — these forty-five states should never have been 
combined or permitted to blossom into one grand republic. It was 
in restraint of the growth and expansion of other nations — a killing 
off of competition — an acquisition of territory which should have 
been left to weaker or distant nations. 



NATIONAL BUSINESS CONGRESS 17 

Another thing: In all this talk about offenses against the law 
it is estimated that less than three per cent of the business interests 
of the country are even under government suspicion. And, because 
of this complaint of three per cent, the other ninety-seven per cent 
of business is powerless to proceed, or if it does, it is at a snail's 
pace. It does not answer the question nor ameliorate the business 
situation to know that the small concerns, which too often have pro- 
moted this fight against the large ones, are now common sufferers 
with those upon whom they have brought down the wrath of an 
impossible law. 

That the country has been able to do so well during the long 
drawn out crusade is the surprising feature. It only still further 
emphasizes the fact that the basis of this country's values and the 
inherent energy put forth by those who are doing its every day work 
compels some good results in spite of those who constantly plot to 
further aggravate the situation. 

But all this does not mean that, its own interests alone con- 
sidered, great business concerns should not be regulated, and saved 
from ruinous internecine strife. Look what regulation has done for 
banking. Does any banker want to go back to wildcat banking? 
Does any insurance man want a return of the days of graveyard 
insurance? As in the matter of tariff, regulation is not so much a 
question of method as of motive. Regulation should be for the sake 
of greater stability — not for the convenience of politics. I will not 
attempt to prescribe a plan ; but, there are some general principles 
which must not be lost sight of in any governmental regulation. In 
my view, the following are important : 

Uniform accounts, and rational publicity of accounts. 
Increase, or other changes of capitalization, only on per- 
mission of government through its proper department. 

Stock exchanges not to be permitted to traffic in securities 
not authorized by the government. Mails also might exclude 
them. 

Corporations not to enter into combinations or pools with- 
out specific government authorization. 

The government, through its agents, to have authority to 
inspect all corporation papers and contracts. 

Complaints as to unjust and unwholesome competition to 
have immediate investigation under proper rulings or restric- 
tions. 



18 NATIONAL BUSINESS CONGRESS 

In the case of tariff-protected concerns, the government to 
have a right to see to it that the benefits of protection are fairly 
divided between the public, capital and labor, as declared for in 
the national party platforms. 

I am aware that the reply to what I have said about enforcing 
the law is, that, "We must enforce the Anti-trust law because it is 
law." In fact the President has expressed himself over and over 
again as determined to enforce it, as if to do so were a virtue beyond 
criticism. Lawyers have been known to fit a law to any desired 
situation. I believe in law. I believe in the enforcement of law, 
but the manner of administration of law should be tempered with 
wisdom and discretion. The United States government was formed 
especially to promote the "general welfare," and our courts have 
many times set aside laws that were constitutionally valid merely on 
the ground that they were against public policy. Any executive of- 
ficer can go fast or slow in the enforcement of laws ; and, in fact, no 
regulative law is ever enacted with the wish or expectation that 
it will be drastically enforced — enforced with such completeness or 
suddenness as to disorganize existing conditions. Sometimes one 
can be "so just as to be terribly cruel." 

We may now recall with profit that the "higher law" of human 
liberty induced the Republican state governments of the North to 
refuse, or fail to enforce the Fugitive Slave laws. The Greenback 
policy, which saved the Union, was held to be at variance with the 
Constitution, until a revised and augmented Supreme Court decided 
differently. 

And, while on the matter of discretion let me say that no ad- 
ministration for fifty years has had the temerity to see to it that the 
Constitution, giving the negro a right to a free and unrestricted 
ballot, was enforced. 

Consider how long the Interstate Commerce Commission has 
been enforcing the safety appliance laws. It may be averred that 
the Anti-trust law has been on the statute books for twenty years. 
This is true ; but it is, also, a fact that until 1903 it was not seriously 
regarded as applying to railroads. And, after that it was not under- 
stood that it actually forbade the combinations that have grown up 
under it. By not enforcing it, by not indicating the extent of its 
supposed application, the government has given tacit consent to 
every combination that has been formed. Justification for the dis- 
memberment of great business organizations and injury of their 



NATIONAL BUSINESS CONGRESS 19 

stockholders, is not established by the mere fact that the government 
has the power to do thus and so. Justification for impetuous zeal 
in enforcing the Anti-trust law would only arise from the fact that 
the public welfare imperatively demands enforcement. By the same 
sign, the English rule of "go-slow" may properly be applied. In- 
stead of enforcing it as hard as possible, it should be enforced with 
as little destructive effect as possible.* 

The average successful manufacturer is the man who made a 
dollar for each ten dollars he put into the business, and who in turn 
put that dollar, and as many more as he could borrow, right back 
into the business. We will say that over a long period of years he 
has builded a fifty or a hundred thousand dollar, a million or a ten 
million dollar concern. As an average proposition, he or his asso- 
ciates cannot sell the plant if they try. It is a going concern. They 
must keep it going to get anything out of it, and when the lean 
years come, it is — if you will permit me to borrow another expres- 
sion from the street — "a lemon." 

The efforts of a statesman should be to assist in avoiding lean 
years and encourage the other kind. The man who takes raw 
material, and by the employment of labor, makes it into a thing of 
value, who, in good years plans an overhead expense, commensurate 
with a judicious faith and optimism in his enterprise and in his 
country, is the man who is hardest hit by the political ambitions, or 
the desire for notoriety of some of our so-called statesmen and of- 
fice holders. 

In making these criticisms, it would, perhaps be well to say that 
I have been in full sympathy with Roosevelt and Taft in their best 
efforts to round up the business field; we have helped fight their 
battles and used their arguments, but the present decade has had 
about all it can stand. In common with millions of others, I am 
tired of it, and believe that the average honest business man of the 
nation should now be given a chance to live a portion of his life free 
from mischievous and unproductive interference. 

Hundreds of thousands of manufacturers are coming to believe 
that there is now more politics and hypocrisy in it all than there 
is of the Spartan honesty Washington would have us think; and 
they object to carrying the burden any longer. 



*Be sure and read Ex-Senator Edmunds' splendid article in the De- 
cember North American Review. Ex-Senator Edmunds was the author of 
the Sherman Antitrust law. 



20 NATIONAL BUSINESS CONGRESS 

We believe that with a deeper thought, with a more statesman- 
like, a more progressively constructive ability than has been shown, 
we could, with the new and honest business conditions already 
secured as our basis, regain, before it is too late, the benefits of 
prosperity to all the people. 

The present administration confronts the possibility — some be- 
lieve, certainty — of defeat, if iron-handed enforcement of disorgani- 
zing commercial legislation is continued. The people look at results 
as reflected in the business conditions of the country. They have 
little excuse, but much condemnation, for hard times. 

Sound advice to manufacturers and business men everywhere 
is — organize — keep your eye on your congressman and your senator, 
to say nothing of a few others in Washington. Don't judge them 
on one vote or two, but the moment you decide that the inclination 
is to play politics, try to reform them. Better reform than defeat. 
Your next man could also be a hypocritical saint. After making 
the effort, however, your full duty has been fulfilled. If he prefers 
and continues the game you object to, start at once; don't wait. De- 
feat him at the next primary or main election. A few friends of 
the "honorable statesman" who have received favors, perhaps 
against the public interest, will oppose you and help the official. 
Don't mind that. They are the most senseless of all men engaged 
in industry. 

Locate some of the industries today, which are or have been 
under fire of the government, and you will find those who are no- 
torious for the acceptance of political favors in the past. They are 
receiving the only and eventual reward of "truckling" to politicians 
who favor them, when that favor is against the people. And if we 
manufacturers are selfish in the demands we make upon our repre- 
sentatives, we, in turn, will and should receive a like chastening. 

The speaker believes that it will not be long before the names 
"Republican" and "Democrat" as applied to parties will be merely a 
memory; the names mean nothing today. The principles of Re- 
publicanism and Democracy have been established ; they are no 
longer an issue. It has become the desire of those who are "in" to 
stay "in," and those who are "out" to get "in." The "outs" pro- 
mulgate a proposition and the "ins" will try to go them one better, 
and vice versa. 

In former days the Republican party was the conservative 
party ; the Democrats the radicals, and it was not a bad division. 



NATIONAL BUSINESS CONGRESS 21 

Any nation should have at least two, and possibly three parties. If 
two, it would be as Conservatives and Radicals. ; if three, the Con- 
servatives, the Liberals, and the Radicals. Then the parties would 
undoubtedly endeavor to live up to the names and be a check on 
each other. In fighting for their principles, they should be willing 
at times to go down in defeat, sticking to their guns. It is the only 
way apparently to emphasize the fact that much of the promise and 
agitation of those who are out, is in reality a dishonest effort to 
manufacture discontent with the incumbent party. Real patriots 
would not be moved by any appeal from the mob or moneyed in- 
fluence which sought to destroy the fundamental policy of their 
party. If value there be in a new and untried policy, permanent 
success for the victorious party would show it. 

It is my conclusion, therefore, that we should work — 

For — A more stable tariff schedule. 

For — An amended Sherman law. 

For — A complete working regulation and not a "Busting 
of Trusts." 

For — The defeat of self-seeking political agitators who 
continually make for disorder in industry. 

For — Party names in politics that will mean something, or 
fairly stable party principles that we can hew to. 

For — A single six or an eight-year term for President. 

For — An established sentiment that will not tolerate in the 
future the comparatively new and increasing practice of a 
President leaving Washington on short or long trips, the appar- 
ent purpose of which is politics. 

For— A preparation, legally, commercially and politically, 
to handle American industry in a comprehensive far-reaching 
way. 

The retrogressive ideas we criticise, hark back to a day that 
is dead, and make in favor of the oldest trust of all — the Mummy 
Trust. 

Today, between the grinding stones of ambition, politics and 
hypocrisy — with the tariff and trust agitation as added emery — the 
average manufacturer of this country is lost; and at the bottom, 
bearing it all, are the people — the real sufferers. 

With the beginning of the present congress, let us hope and 
pray for a brighter day. In the broadest sense we must work for 
man, for law, for country, for co-operation, for good-will and for 
industry. There is a world-wide work to do. It is a noble and in- 



22 NATIONAL BUSINESS CONGRESS 

spiring labor. Without the handicaps we have been constantly com- 
pelled to face, we, of the United States, CAN, WE WILL, WE 
MUST take and bear our full share. (Applause.) 

The Chairman : We have carried out our morning program, 
gentlemen, and unless you have some objection, we will adjourn 
until 2 :30 this afternoon. 

Mr. Frost : Mr. Chairman, one moment. I believe the Chair- 
man of the Entertainment Committee has an announcement he de- 
sires to make, or perhaps I can make it for him. He will be in 
Room 10 at the conclusion of the exercises this morning, and will 
there distribute tickets for the theater tonight. All of the delegates 
and the speakers are cordially invited to meet Mr. Bode after ad- 
journment, in Room 10, outside the Gold Room. 

Mr. T. M. Sechler (of Moline, Illinois): Mr. Chairman: 
The reference by our speaker to the Income Tax as class legislation 
calls to mind the rather masterful decision of our Supreme Court 
when it half-way reversed its decision of twenty years before on 
the Income Tax. The position, practically, is this : A tax on in- 
come is not an income tax if it is discriminatory; but if it is uni- 
form, as provided by the Constitution^ it is unconstitutional. I think 
we are pretty good American citizens if we do not lose any measure 
of our respect for that august body. 

The meeting adjourned until 2 :30 o'clock p. m. 



NATIONAL BUSINESS CONGRESS 23 



SECOND SESSION. 



Monday, December 11, 1911. 
2 :30 o'clock P. M. 

The meeting was called to order by Chairman Sheldon. 

The Chairman : The Chairman of the Entertainment Com- 
mittee, gentlemen, will explain to you what he has in mind for your 
entertainment. 

Mr. Bode : Mr. Chairman, and Gentlemen, Delegates and 
Friends : The Entertainment Committee have arranged to entertain 
you this evening at the Chicago Opera House, where will be given 
"Gipsy Love" by a very eminent artist. We trust you will avail 
yourselves of the opportunity of attending this affair, and tickets are 
at your disposal in Room No. 10, where I will be pleased to hand 
them out. In addition to that, there will be an entertainment tomor- 
row evening. The Chicago Grand Opera Company will present 
"Samson and Delilah." We do not wish you to take a ticket for your- 
self only, but if you have a lady here we will be pleased to extend 
the invitation to her as well. Further than that, there will be a ban- 
quet on Wednesday evening. I trust most of you have secured 
tickets for that; if not, if you will present yourselves to Secretary 
Burnham, he will be glad to present tickets to you. 

(Applause.) 

The Chairman : Gentlemen, the first speaker of the after- 
noon is Mr. Henry M. Wallis, of Racine, Wisconsin, Chairman of 
the State Legislation Committee of the National Implement and Ve- 
hicle Association, who will address you on THE NECESSITY 
FOR THE BUSINESS MAN IN POLITICS. 

Mr. Chairman and Gentlemen : It is an honor and a privilege 
of which I am deeply sensible to be invited to address a meeting 
of representative business men such as are gathered here today 
under the auspices of the National Business League of America. I 
appear before you not entirely in an individual capacity, but as the 
representative of the National Association of Implement and Ve- 
hicle Manufacturers, an organization employing some 55,000 em- 
ployes, and representing business interests of upwards of $300,000,- 
000.00 ; an organization representative in its membership of the best 



24 NATIONAL BUSINESS CONGRESS 

that there is, large as well as small, in their allied lines, and an 
organization which has already expressed itself upon the subject 
of my address — "The Necessity for the Business Man in Politics." 
At a meeting of the National Implement and Vehicle Associa- 
tion, held in this room on October 17th, 18th and 19th, of this 
year, the following resolution, introduced by me as Chairman of the 
States' Legislation Committee, was unanimously adopted : 

Whereas, In the minds of many men the present day 
trend of legislation is becoming inimical to the welfare and best 
interests of the people, because upon business prosperity hinges 
the prosperity of the wage-earner, the farmer and others, and 
that therefore it is time for all good citizens to unite in oppos- 
ing further unfair and unreasonable legislation; and 

Whereas, The continued unjust and unreasonable attacks 
upon business interests and persons prominently connected 
therewith, regardless of the effort on the part of the business 
men generally, to comply with and govern their respective busi- 
nesses according to law ; therefore be it 

Resolved, That the President of this Association be autho- 
rized to appoint a committee of five members to be known as 
the committee on political action, for the primary object of in- 
teresting other organizations to appoint similar committees, and 
when such committees are appointed, to obtain a joint meeting 
of all the committees so appointed, for the purpose of consid- 
ering ways and means and recommendation to their respective 
organizations for further action. 

Do not mistake, gentlemen, the object of the appointment of 
this committee on Political Action. It is in no sense partisan. Our 
organization is strictly non-partisan, but the time has arrived in the 
judgment of our Association, when business men should unite for 
political action in its broad sense. 

Heretofore the business man has been in politics spasmodically, 
if at all, as he was in 1896, the result of which memorable cam- 
paign you all know. It was a glorious victory for the cause, around 
which, and to the support of which, business men of this country 
rallied. 

The situation today is, I admit, a more complicated one for 
business men generally to unite upon. In 1896 we had before 
us a well-defined, specific issue, upon which the two great politi- 



NATIONAL BUSINESS CONGRESS 25 

cal parties were divided, and the business interests were rallied 
under the banner of the party which stood for the maintenance 
of the gold standard, but the fundamental cause which aroused 
us was the fact that we deemed our business interests in jeopardy; 
and so I take it we are gathered here today because, again, we recog- 
nize that our respective businesses are being menaced by some, if 
not many, of the present-day political theories, and because of the 
further fact that since 1896 too many of the business men of this 
country have been neglecting their political business. 

I know well the antipathy felt by the average business man 
today being mixed up in politics. He feels that he has no time for 
it, is not fitted for it, and is thoroughly disgusted with it. These 
sentiments I fully share, but feel their lack of sound reasoning, and 
regard them in the nature of an excuse. As business men ac- 
customed to analyzing situations, drawing conclusions and acting, 
what shall we do about the situation? Shall we sit still and allow 
the demagogue and the politician to continue to sway public opinion 
and control legislation? Or shall we in the future have something 
concrete to say as to the laws that shall be enacted, governing and 
affecting our business and the commerce of this great nation? If the 
answer is in the affirmative, how shall we proceed? 

This is a serious question. The field is large, the ramifications 
many, and, before attempting recommendations, I desire to present 
for analysis certain phases of the situation confronting us. 

It is generally conceded by business men that there is too much 
agitation, sensation and political legislation. Much of this is due 
to the lack of business ability in our legislative bodies. There are 
too many incompetent legislators, and, in proportion to business 
men, too many lawyers making, or seeking to make, laws for us. 
We need more business men in Congress, and in the State Legis- 
latures, if we are to have clear, well-defined, workable laws, without 
jokers — laws which can readily be interpreted and under which we 
can intelligently conduct our business according to law, which busi- 
ness men generally are not only willing but anxious to do. 

The present-day trend of legislation, National and State, is to 
regulate every function and activity of life by statutory enactment, 
and, as indicative of the law-making craze sweeping this country, it 
may be of interest for you to know the number of bills introduced 
and enacted into laws in some of the states in which legislative ses- 



26 NATIONAL BUSINESS CONGRESS 

sions have been held during the past year. In the state of Nebraska 
there were 1,000 bills introduced, 227 of which were enacted into 
laws : 

Indiana 1,200 introduced, 292 enacted into laws. 

Wisconsin 1,690 introduced, 665 enacted into laws. 

Missouri 1,728 introduced, 229 enacted into laws. 

Massachusetts 3,594 introduced, 1,394 enacted into laws. 

(Massachusetts has a legislative session every year.) 

New York 3,628 introduced, 869 enacted into laws. 

Pennsylvania 1,900 introduced, 847 enacted into laws. 

Other states have been more or less prolific. In Oklahoma 
recently a law has been passed regulating the length of hotel bed 
sheets. Massachusetts enacted a law making it a crime punishable 
by a fine of $100.00 for an employer to employ a woman two weeks 
before or four weeks after child-birth. These instances sufficiently 
illustrate the law-making craze which is sweeping these states; a 
like tendency also animates our National Legislative body. 

We have heard a great deal about "Undigested Securities of 
Wall Street." It occurs to me that we have much undigested legis- 
lation, and we should be given an opportunity to Fletcherize before 
having another batch to contend with. 

What we need at present, and one of the things which it seems 
to me the business man should stand for is sane, economic and con- 
structive legislation as against the sentimentalism which has re- 
sulted in political, rather than economic and constructive legislation. 
In other words, some political agitator is struck by a brilliant vote- 
getting idea, which he launches with great eclat and with little re- 
gard for the underlying basic, economic principles. This is rushed 
through the legislature as a hastily drawn, vote-getting measure, and 
too often becomes enacted into law, regardless of its effects upon 
the business interests of the country. 

There is one law which is of particular interest to every em- 
ployer of labor, namely:' "The Workmen's Compensation Act," 
which has been enacted by various states. I want to direct your at- 
tention particularly to this Act, because of the general consideration 
now being given by nearly all of the states to the passage of some 
form of "Workmen's Compensation Act" and to the necessity for 
awakening to active interest in the operation of these laws in the 
states where they have been enacted and the directing of correct leg- 
islation in the states where such laws have not, as yet, been enacted, 



NATIONAL BUSINESS CONGRESS 27 

and as well as to preparation for dealing with the amendments 
which are sure to follow, which amendments under the leadership 
of politicians will result in so enlarging the scope of these laws that 
we may find ourselves operating under conditions as bad, or worse 
than those now existing in England. The scope of Compensation 
Acts has been extended in England to such an extent that in some 
respects it has become ludicrous. As illustrative of the changes 
which have taken place there during the past decade, permit me to 
quote from the work of Thomas Learning, entitled, "A Philadelphia 
Lawyer in the London Courts," in the concluding chapter of which 
he says : 

"Both the public opinion and the law of England were for gen- 
erations characterized by the quality of conservatism. The various 
reform Acts, starting in 1812, marked the advent of an epoch of 
individualism which lasted for over fifty years, and made England a 
land where personal liberty and private property were, perhaps, 
safer than ever before in the World's history. It was a country 
where the government's chief concern, was to furnish irreproachable 
courts, competent police, and few but honest civil servants, so that 
each man might pursue happiness after his own fashion, and with 
the least possible interference and yet with complete confidence that 
he could assert his rights effectively when invaded. Hence, it was 
that America learned to look to England for precedents. 

"All this is changing. The substitution of the doctrines of col- 
lectivism for those of individualism began in 1885, and it proceeds 
rapidly in many directions. The Socialistic harangues one hears 
from vagabonds, mounted on benches in Hyde Park, are delivered 
without interference by the police. The spreading of discontent by 
paid agitators proceeds at the market crosses and in the taverns of 
the villages between elections. Later the politicians appear and 
solicit votes for impossible schemes, an increasing proportion of 
which are actually adopted by Parliament, and of which the laws 
regulating liability for personal injuries, attacks upon land, and 
other forms of poverty, old age pensions and methods of public edu- 
cation furnish typical examples." 

Here we desire to call your attention particularly to what the 
author has to say with reference to Employers' Liability Acts. 

"The first Workingmen's Compensation and Employers' Lia- 
bility Acts were tentative steps, but laws quickly followed extending 
the liability and reducing the defenses, particularly in the matter of 



28 NATIONAL BUSINESS CONGRESS 

contributory negligence. A law recently went into effect making 
every man liable for an injury sustained by any person — not neces- 
sarily his servant — while in the house or factory, or on his land or 
ship, irrespective of any fault on his part, and notwithstanding the 
contributory negligence of the injured person, unless the latter is 
intentional — suicidal. 

"In addition, the last Act created another and unheard of form 
of liability for an employer, requiring him to compensate his serv- 
ant, if the latter falls ill or dies of an industrial disease' — a list of 
which diseases was appended to the Act — and with the extraordi- 
nary provision that, having paid the compensation, the employer may 
sue any former employer for the amount, if he can prove the servant 
actually contracted the complaint in the earlier service and within 
ten years. Of course, universal accident liability insurance fol- 
lowed, the cost of which must be borne by the proprietor, and, if he 
is a manufacturer, eventually by the consumer. As may be 
imagined, such laws give rise to surprising results. The report of 
one of the great accident liability insurance companies made shortly 
after the passage of this law exhibited, for example, the recovery 
of damages by a domestic servant, who, while eating a meal, had 
swallowed her own false teeth ; another had contrived to swallow a 
curtain hook ; a third was burned by the bed clothes taking fire from 
a hot iron which she had wrapped in flannel for the purpose of 
warming herself. A footman was bitten while attempting to extract 
a cat from the jaws of a dog; a nursemaid was burnt by letting off 
fireworks in a back garden at a private celebration of the servants 
during the master's absence, and a cook had her eyes scratched by 
the housemaid." 

At the present time we are experiencing in America a few 
touches of the "Doctrine of Collectivism," although it is known by 
a different name — Insurgency, and in these latter days "Progres- 
sivism" — and found in both parties. 

If any business man here thinks that we are going to escape, in 
this country, the experience which England is going through, and 
that the politicians will overlook any precedents gathered therefrom, 
he is more optimistic than I am, and I would recommend that he 
form some personal acquaintance with the attitude of his own legis- 
lators, and, if he does, I predict the same surprises in store for him 
which the members of the various legislative committees have ex- 
perienced, and that it will be found that there is a game going on 



NATIONAL BUSINESS CONGRESS 29 

which is not being conducted with a special regard for the interests 
which we represent, nor will there by any particular desire evi- 
denced on the part of the political representatives to enlighten you 
upon things going on in the committees and the lobby. Not all rep- 
resentatives, of course, are thus disposed. One State Senator said 
to a member of my committee : "I have been aware of the trend of 
legislation for the past ten years, or more. It is time that you and 
the interests you represent were waking up, and when the present 
legislature gets through with you, I think that you will be awake." 
I hope, gentlemen, that the senator's prediction will prove true, and 
that business men, generally, have had sufficient adverse legislation 
to thoroughly arouse them, though it seems to take a political earth- 
quake to bring us to action. We have had some shocks recently, 
and the man with his ear to the ground again hears rumblings. The 
important question is, will the business man act in time to avert the 
political earthquake impending? 

Another phase of legislation which needs our serious attention 
is (1) The Income Tax, state as well as federal, (2) The Inheritance 
Tax, and, in some states, (3) County Taxation on Foreign Corpora- 
tions. In the State of Arkansas, in the County of Arkansas, last 
spring, the Board of Review investigated the county records and 
arbitrarily taxed chattel mortgages, and other evidence of indebted- 
ness against several foreign corporations, notwithstanding that they 
were maintaining branch houses and paying personal property taxes 
into the County Treasury. One of the parties so taxed, being a 
member of our Association, we are now making a test case of same. 

The attitude of labor and the Socialistic tendencies with which 
we are confronted, demand our presence in the field of politics, for 
when the labor demagogue and his sympathizer seek to say to one 
class of citizens, "You shall not be employed without our sanction 
and the card of our Association," and to another class, "You shall 
not employ labor that does not submit to our tactics and carry our 
Union card," he violates one of the cardinal and fundamental prin- 
ciples of the Constitution. While recent events in Los Angeles have 
clarified the labor situation, they emphasize, rather than lessen the 
necessity for the business man in politics ; for if, as a result of the 
confession of the McNamara brothers, the use of dynamite and 
brute force as a weapon of warfare is abandoned, the labor dema- 
gogue will seek with renewed effort, the enactment of class legisla- 
tion. 



30 NATIONAL BUSINESS CONGRESS 

For some time past this type of lobbyist has been active in 
nearly every state capitol and at Washington, and has not hesitated 
in his endeavor to make the power of his organization felt on all 
political questions, nor to instill into the mind of the politician, the 
fact that he has the votes with which to back up his demands, just 
or unjust. 

While many business men today do not deny the right of labor 
to organize, nor object to legitimate unionism, they do object to the 
militant unionism of some leaders and their sympathizers, just as 
they would object to the church militant in politics. Neither the 
one nor the other has the right to dominate the free institutions of 
this glorious republic. That the "Labor Union Militant" is not an 
idle term, many of us who have had experience in labor disputes 
fully realize, and the public is daily gaining a knowledge of the true 
inwardness of the situation, notwithstanding the credulity of Mr. 
Gompers. The Chicago Record-Herald, which published a state- 
ment of his being astounded, gave in the same issue a list of some 
sixty-seven dynamite explosions charged to iron workers, and extend- 
ing over a period of the past eight years. Had the McNamara 
case been the first instance in which violence has been charged 
against Unionism, Gompers' credulity might be more easily under- 
stood, and accepted by a disinterested public. Business men who 
have had experience in strikes can tell of many instances of violence, 
minor, of course, in comparison with the dastardly acts of the Mc- 
Namara brothers, but repellent, nevertheless, to the average, fair- 
minded American citizen; and, while I do not hold the rank and file 
of labor responsible for these acts of violence, save by their silence 
in the past, and apparent lack of effort to stamp them out, I do 
maintain that none but prejudiced parties "can believe that the Mc- 
Namara brothers acted of their own volition, or at their own expense. 
It costs money to conduct secret destructive campaigns such as theirs. 
Where did this money come from ? It is significant that these out- 
rages have been committed in nearly every instance where there 
has been conflict with union labor. I sincerely trust that all guilty 
parties, whoever they may be, will be discovered and brought before 
the bar of justice. There are no words strong enough with which 
to condemn the tinkering journalist who, seeking to create a public 
sentiment in favor of cold-blooded murderers, publishes a statement 
such as Lincoln Steffens is reported to have made: "They think 
they are serving a cause, that they are fighters in a war; and they 



NATIONAL BUSINESS CONGRESS 31 

are." Yes, a war of anarchy, but not a war in the interest of good 
government, nor labor, nor of any class of citizenship. Fortunately, 
Judge Bordwell's denial of the part which StefTens claimed to have 
played, has consigned him, to use Grover Cleveland's phrase, to in- 
nocuous desuetude, and there we may let him rest. I feel that this 
country owes a debt of gratitude to District Attorney Frederickson, 
and to Judge Bordwell, and that their names will go down in history 
in the annals of jurisprudence of this country. The men who lost 
their lives are the martyrs, and the sympathy of the public should go 
out to their families and friends. 

If the incidents to which I have just referred have not stripped 
the mask from the labor demagogue and his sympathizer and al- 
lowed the public to realize fully what, in the minds of many thinking 
men, has been the animus back of their pernicious activity, namely 
to rule or to ruin, then let the campaign of education continue until 
the public is fully awake. 

Trade unionism, in its system of apprentices, is thoroughly un- 
patriotic. To illustrate : In order to increase the wages of a com- 
paratively small number of men — small in comparison to the vast 
army outside the ranks of unionism — they limit the number of boys 
or men in their respective trades to : 

In the Carpenters' trade, 1 to 10. 

Marble Cutters, 1 to 10. 

Moulders, 1 to 8. 

Printers, 1 to 5. 

Plumbers practically admit no apprentices, but have what 
are called "helpers." 

Plasterers ballot for each apprentice, and experience, it is 
explained, shows that nearly every one is black-balled. 

The effect of this is that the labor union is maintaining a first- 
class monopoly in restraint of trade, and, in order to divert the 
public mind from their monopoly, they are loud in their denuncia- 
tion of capital and trusts. Capital may have many sins to answer 
for, but it has not yet been guilty of such a selfish, vicious, and 
short-sighted policy as that of closing the industrial avenues to the 
growing youth of this country. 

In New York state alone, statistics show that there are about 
150,000 boys between the ages of 16 and 20 loafing. Such a condi- 
tion ought not to exist, and business men cannot shirk their respon- 
sibility for resultant conditions if this is allowed to continue. 



32 NATIONAL BUSINESS CONGRESS 

It is no wonder that Mr. Gompers and his associates are now 
seeking to have the labor unions exempt from the provisions of the 
Sherman Anti-trust Act, and that Mr. Hughes, of New Jersey, rep- 
resenting the demands of organized labor, proposes to exempt agri- 
cultural, horticultural and labor combinations from the provisions of 
the Sherman Act. 

Somewhat in connection with this there is an excellent editorial 
in the Chicago Tribune of December 4th, headed, "Healthy, Good- 
tempered Boys." It is too long to embody in this address, but I 
recommend those who have not read it to do so. 

It has been my aim to present for your consideration and analy- 
sis certain phases of the present state and national situation pointing 
to the necessity of the business man in politics. I understand there 
is to be a free discussion upon this floor, and I wish to present, in 
closing, recommendations relative to a general line of policy which 
may be pursued. As specific issues are taken up for discussion, 
issues such as the Sherman law, its amendment or repeal, a national 
incorporation law, or a federal license law, and other kindred issues, 
we shall find much difference of opinion and difficulty in unanimity 
of action, but my recommendation is that we endeavor as a result of 
our deliberations to evolve a concrete business policy, which shall be 
sufficiently broad in its scope to constitute a business platform upon 
which business men will rally, and for which they will fight to the 
extent of having it inserted in a plank in the platforms of both 
political parties. President Taft, in his Olympia speech, said re- 
cently : "It is certainly hard to determine these days who is a Re- 
publican and who is a Democrat." And the average business man, 
as he listens to the present day doctrine of Republicanism or De- 
mocracy, often wonders if the one is not slipping to the saddle of the 
donkey and the other climbing the tail of the elephant. I recom- 
mend, therefore, a business man's platform to be inserted as a plank 
in the platform of each political party in order that our forces may 
not be split into parties and groups, and for the further reason 
that, since the issues of the day are being dealt with in much the 
same way by both parties, we are the target for both. 

We may have confidence in the ultimate success of our en- 
deavor to form a business platform from the fact that some 20,000 
bankers, at their recent meeting in New Orleans, reached an agree- 
ment on an important question, the plan for a Central Reserve As- 



NATIONAL BUSINESS CONGRESS 33 

sociation, and I suggest that this may be one issue on which we can 
agree and take as one of our planks. 

As a final result of our deliberations, gentlemen, I hope that we 
shall evolve a policy sufficiently broad in scope to unite the business 
men, and keep us safely building upon the foundation structure of 
our Constitution, as opposed to the quicksands of many of the pres- 
ent day political theories. I am not among those who think we have 
outgrown the Constitution. The words of Alexander Hamilton are 
still pertinent, and might well have been written on the conditions 
of today instead of those of 130 years ago. He says in one of his 
Federalist papers : "A dangerous ambition more often lurks behind 
the specious mask of zeal for the rights of the people than under the 
forbidden mask of zeal for the firmness and efficiency of govern- 
ment. History will teach us that the former has been found a 
much more certain road toward the introduction of despotism than 
the latter, and of those men who have overturned the liberties of 
republics, the greatest number have begun their career by paying 
obsequious court to the people, commencing demagogues and ending 
tyrants." 

Thus in the words just quoted does Hamilton uncover to us as 
we heed it an old new danger. We have become so accustomed to 
the present day political demagogue that we have grown careless 
and heedless of his warning that the demagogue of today may be- 
come the tyrant of tomorrow. It is my deep-seated conviction that 
the welfare of this republic demands now the steadying hand of the 
man of intelligence and affairs, and therefore this appeal is made for 
the business man in politics, and is directed to man, not interests, to 
the men of this country — in the broad sense of Bobby Burns, "A 
man's a man for a' that and a' that" ; in that broad sense of Henry 
George when he said : "I am for men" ; in the broad sense of David 
Hill when, in dealing with the ideal, he once said, "I am a Demo- 
crat." And in the still greater and broader sense in which each 
and every one of us may say, "I am an American, standing for the 
traditions of my forebears and the constitution for a greater and 
nobler republic." 

(Applause.) 

The Chairman : Is there any discussion desired, gentlemen, 
on the subject of this last address? If not, we will proceed to the 
next. 



34 NATIONAL BUSINESS CONGRESS 

Mr. Durand : Mr. President, is it generally understood about 
that discussion, whether each paper is to be discussed immediately 
after it, or set apart a certain time for the discussion of the differ- 
ent subjects, allowing so much for each? 

The Chairman : My idea was, Mr. Durand, to give both op- 
portunities. It seems to me, gentlemen, that if there is any discus- 
sion to take place in connection with these subjects, that it ought to 
be done as we go along; that is my judgment. But in this particular 
instance there does not seem to be any desire to discuss the subject. 
Therefore, we will proceed to the next subject. 

One of the most important subjects which we have on our list 
for discussion is that of Merchant Marine. When I say Merchant 
Marine, I mean Merchant Marine which will fly, the flag of the 
United States. One of our Board of Directors has devoted a great 
amount of time and study to this subject, and he is here this after- 
noon to give you the result of his study, and his views. Ladies and 
gentlemen, Mr. Rosenthal. (Applause.) 



HOW TO GET A MERCHANT MARINE. 



By Benjamin J. Rosenthal. 



Mr. Chairman and Gentlemen : 

At the outset I want to place before you a few pungent facts, 
so that you may better follow my remarks. 

Our foreign trade amounts to over $3,500,000,000 annually. 
About ninety-three per cent of it is carried by foreign ships. These 
ships belong to conferences, pools or combines. There is no compe- 
tition. Rates are fixed abroad by agreement, and the United States 
is terribly discriminated against by this combine. Our commerce is 
absolutely at its mercy. In order to appreciate the gravity of this 
situation I suggest that you read the Congressional Record contain- 
ing the speech of the Honorable William E. Humphrey in the Sixty- 
first Congress, and study the exhibits that he presented to Congress, 
showing the discrimination against the United States by this foreign 
conference, or pool, and showing the tremendous power which this 
pool possesses. Not only does this foreign conference fix the rates, 
but it furnishes the United States, especially for its South American 



NATIONAL BUSINESS CONGRESS 35 

export business, the worst of its ships, slow and antiquated, and 
this accounts in a large measure for the fact that the European coun- 
tries sell so many more goods in South America than we do, for 
the finest vessels that run between here and South America make 
but thirteen knots an hour and take about a month to go from New 
York to Buenos Ayres, and aside from that the rate established by 
the conference for this miserable service is considerably higher than 
that between Europe and South America in up-to-date vessels. A 
merchant in South America sending an order to us cannot possibly 
get delivery within three months, hence he sends his orders to 
Europe, where he can get prompt service. Notwithstanding that the 
same conference operates and controls both lines of steamships, we 
get the very worst at the highest rate. If you will look over the 
sailing lists of vessels from the United States to Buenos Ayres and 
from Europe to the same place you will be appalled at the situation. 
If a South American wants to come to the United States, how does 
he come? Why, by way of Europe. And why does he go first to 
Europe to get to us ? Because he can get here by going via Europe 
more quickly and in a first-class steamer. By the time he arrives 
he has bought most of his goods abroad. How can we ask a mer- 
chant down there to respect us when he hardly knows we exist, for 
not a single American steamship is now running on any of the long 
routes to South America ? It is getting so now, that American manu- 
facturers, in order to meet this difficulty, are establishing factories 
in Europe so as to compete with the foreigner in getting the South 
American trade, shipping from Europe to South America. Is not 
this a ridiculous situation? And the foreign steamship trust is re- 
sponsible for these conditions, and we sit supinely by and allow this 
plundering to continue. And then we hold Pan-American confer- 
ences and ask the South American why he does not patronize us 
more liberally ! 

The records show that these pools have steadily increased the 
freight rates from the United States to foreign ports more than five 
hundred per cent in some instances. They have been known to 
bring a cargo from Europe to Seattle for $1.50 a ton and then de- 
mand $6.90 for a return cargo between the same points, because the 
conference had fixed that rate, and if they could not get it the ship 
was obliged to go back empty handed. These facts may be dis- 
puted, but the records are on file in Washington and cannot be de- 
nied. We have American lines in the Pacific to which we pay a 



36 NATIONAL BUSINESS CONGRESS 



ship subsidy, and the evidence even shows that these lines, prob- 
ably in self-defense, have been obliged to join these conferences. 

Who are the principal stockholders of this giant ship combine, 
the greatest combination in the world ? Why, the big European ship- 
pers, of course. And do you blame them for trying to stifle Ameri- 
can competition by establishing discriminatory rates and by giving 
us the worst and slowest ships ? 

The world today is engaged in a commercial war, and the great- 
est nation will be the one that is most extensively engaged in trade, 
for a nation that neglects this important feature cannot long remain 
a first-class nation. This country is undoubtedly the richest in the 
world. We have greater natural resources and we have more to 
sell than any other nation, and to keep our great country at the front 
we must first of all protect it commercially. This nation should 
always be the greatest commercial nation in the world. This gov- 
ernment is justified in resorting to every honorable means to main- 
tain that position, and so long as it is maintained we need have no 
fear of the country's safety or of its progress. Our flag today is 
but a memory outside of this country. We pay nearly a million a 
day to foreign ships for carrying our commerce. We have over a 
hundred thousand less tons of shipping engaged in over-sea com- 
merce than we had one hundred years ago when our nation was 
scarcely recognized. What we need — and I am sure there is no one 
within the sound of my voice who will dispute it — is direct and 
regular lines of communication between our nation and other na- 
tions; and these lines must be controlled by our nation, so that no 
discrimination can possibly be made against us ; and they must carry 
our flag. When this is accomplished our foreign commerce will 
jump by leaps and bounds and our prestige abroad will be greatly 
enhanced. Every ship of our nation touching the shores of a for- 
eign country will advertise us. 

The history of the commercial progress of foreign nations — 
and this means of their progress and greatness among nations, for 
any nation that is commercially great is progressive in other direc- 
tions — dates from the time when they established their own means 
of communication with other nations. You may say, zve have made 
great progress, despite this handicap, but who can say what our posi- 
tion would have been today had we kept pace with our merchant 
marine ? And if we study the history of the progress of civilization 
we will find that an increase of commercial relationship was the 



NATIONAL BUSINESS CONGRESS 37 

immediate result, where lines of communication, whether by steam- 
ship or rail, were established. I need not convince any thoughtful 
man of this fact. And where communication, once established, was 
discontinued, disintegration immediately set in. 

Trade has unquestionably followed the flag, as orders follow 
the traveling man. We have vast fields of production, and now we 
must get these products to the bases of consumption. So far we 
have been most fortunate, owing to our great and unlimited re- 
sources and our great energy. We have been able to hold our own 
with foreign countries, even with the handicap of paying higher 
freight rates than our foreign competitors. But our foreign com- 
petitors are also awake and getting stronger each day. After all is 
said, I still claim that with the same facilities that Germany or Eng- 
land or even Japan has for. shipping merchandise, the commerce of 
our nation would have developed in proportion to the expansion of 
communication of our own ships with foreign countries. 

Some may say, "Let well enough alone," but we are never well 
enough, if when a little wave of depression hits us in our own coun- 
try we are obliged to retrench and shut down shops and throw 
thousands of people out of work, when we might just as well be kept 
busy supplying the nations of the world from our abundant re- 
sources. Whenever you find a business man who says, "Let well 
enough alone," you find one who is standing still, asleep, and when 
he awakes and wants to run, his competitors are so far ahead of him 
that he cannot overtake them. 

We are building a canal that will cost over $400,000,000, and 
make shorter routes for foreign ship owners to become richer, and 
by shortening the distance we just increase the competition we now 
have, by enabling foreign bottoms to save at least one-third on their 
coal bills, making three trips where they formerly made two ; and 
even now foreign countries are building larger and better ships to 
capture more of the trade with South America, as soon as the canal 
which we are building is opened. And we sit idly by, and ask the 
South American why he does not do more business with us ! The 
shame of it ! 

If we had the ships we could easily have most of the trade on 
the entire west coast of South America, which is now controlled by 
Europe, for with the new canal we will be from 2,000 to 3,000 miles 
nearer there than Europe is. But of what avail will this be, if we 
have not the ships to send there? The southern cotton grower, the 



38 NATIONAL BUSINESS CONGRESS 

eastern and western manufacturers, all would alike be benefited by 
this great route shortener, if we only had the ships. Think what any 
of our transcontinental railroads would pay to shorten the distance 
from coast to coast by one-third, and what it would mean in the 
saving of freight rates to this nation ! 

In 1910 we shipped $100,000,000 to South America. Why, the 
Argentine Republic alone bought that many goods in the same pe- 
riod from Great Britain, so you see how infinitesimally and pitifully 
small are our exports to South America, a market that belongs to 
us, as compared with those of Europe. 

South America produces many raw materials and food prod- 
ucts, such as sugar, coffee, rubber, hides and wool, which we need, 
and we could supply them with many of the necessaries of life and 
manufactured goods, so that we could send a shipload down there 
and bring a shipload back, and all we need is our own ships to carry 
them. Then we could make a freight rate to our manufacturers to 
encourage them to compete with foreign manufacturers, and to pre- 
vent any discrimination against them, and we would also extend this 
low freight rate to South Americans to encourage them to trade 
back with us. 

I will give you a slight idea of the imports of some of the 
South American republics — Brazil, Uruguay and Argentine, three 
countries on the east coast of South America; Argentine, with 
6,000,000 people, imports merchandise valued at over $300,000,000; 
Uruguay, with 1,200,000 people, $40,000,000; Brazil, with 20,000,- 
000 people, $180,000,000, or a total of over half a billion, and nearly 
all of these imports could and should come from us, whereas only 
about ten per cent come from us and the balance from Europe. This 
condition would change very quickly if about $20,000,000 were 
immediately expended for first-class merchant vessels, sailing the 
American flag, plying between these ports, and this half a billion of 
commerce annually would begin to turn our way very quickly. As 
business men you will readily see that this is a good commercial 
investment, aside from the protective feature. 

Now take the west coast : Chili has a population of 3,400,000, 
and imports about $100,000,000; Peru has a population of 4,500,- 
000, and imports about $30,000,000, and less than ten per cent of 
these imports come from the United States. Yet for all of the com- 
merce which we now have with all of these countries, either on the 



NATIONAL BUSINESS CONGRESS 39 

west or the east coast of South America, we are dependent today 
absolutely on foreign ships. 

Before I leave the commercial aspect, I want to give you a few 
more statistics. England transports over ninety per cent of her 
commerce in her own ships, Germany over fifty per cent, France 
about thirty per cent, and the United States about seven per cent. 
England, with about $5,000,000,000 of commerce, has a ship ton- 
nage of about 20,000,000 tons. Germany with about $4,000,000,000, 
has about 4,500,000 tons, and the United States, with over $3,500,- 
000,000, has less than 1,000,000 tons, and even little Norway, with 
less than $200,000,000, has a tonnage twice as great as the United 
States. Prior to the year 1800 we had a tonnage almost as great as 
we have today, and eighty years ago ninety per cent of our foreign 
commerce was carried in our own vessels. 

We have ten regular ocean going steamships. Great Britain has 
about eighty-five hundred, and fifty years ago we rivaled her. Out 
of three hundred ships passing through the Suez Canal in 1909 we 
had one. Mr. Charles H. Sherrill, United States Minister to Argen- 
tine, states that in eighteen months he saw only one American flag 
and that was on a man-of-war. Out of 4,332 vessels entering the 
port of Buenos Ayres in 1909 only four had our flag, and they 
were lumber schooners. The money that we get for our exports in 
excess of our imports we pay right back to foreign ship owners in 
the way of freight. If you want foreign powers to respect you, just 
let them see your ships entering their ports carrying your flag and 
loaded down with your merchandise. If we had a respectable mer- 
chant marine our shipping would soon reach tremendous propor- 
tions and our railroads could make lower freight rates to carry our 
merchandise across the continent for export, for the great additional 
volume of business would enable them to do so with even a greater 
profit. All of this would not only increase materially the prosperity 
of our country, but would reduce the cost of living, for our manu- 
facturers with a greatly increased business could turn out this addi- 
tional product with but little increase in overhead and thus could 
manufacture more cheaply, and instead of shutting down valuable 
plants in times of stress and throwing them on the scrap heap, we 
could use all these enterprises that took so many years to build up. 

I am sorry that I have taken so much of your time with sta- 
tistics in my endeavor to show the desirability, from a commercial 
standpoint, of a merchant marine. I do not think I have changed 



40 NATIONAL BUSINESS CONGRESS 

the opinion of a single individual on that point, for I am sure that 
every one who has paid even scant attention to the subject was con- 
vinced long before he entered this hall that a merchant marine is 
absolutely necessary to protect the commercial welfare of this 
country. 

There is another and even more important reason why we 
should have a merchant marine, and this reason affects very mate- 
rially the safety of this nation. This may seem a broad statement, 
but I am reminded of a paragraph in a speech in Congress when 
the subject of a merchant marine was under discussion, and one of 
the members of Congress said that if we were ever engaged in a 
war the first thing we should do would be to destroy our navy, so 
that the enemy could not capture it and use it to destroy us. This 
was naturally laughed at, but I am wondering whether under the 
present conditions this Congressman was so far off. Let us analyze 
this phase of the situation. 

Our present navy consists of about 225 warships, including 6 
transports, 7 supply ships and 2 hospital ships. We have 19 
colliers, with a total cargo capacity of 75,000 tons. Assume that 
we become engaged in war, the seat of which is 3,000 miles from 
our nearest station ; it can readily be seen how helpless we would be 
with but two hospital ships, six transports and seven supply ships. 
The Admiral of our Navy, as President of the General Board, in 
a report to Congress says that "in time of war the great need of 
auxiliary vessels is immediately felt by both the army and navy, 
and the existence of a large fleet of American-owned vessels, avail- 
able at once for conversion into transports or supply ships, would 
undoubtedly be of great importance in expediting the departure of 
troops and in supplying them after departure. These vessels could 
be used as scouts, colliers, ammunition ships, supply and refriger- 
ating, distilling and hospital ships, repair and torpedo depot ships, 
transports, dispatch vessels and tugs. The most important service 
that a merchant marine could accomplish would be for scout pur- 
poses, when the sea could be kept and good speed made. One ves- 
sel for this purpose would be needed for each battleship. The navy 
would need a number of colliers of at least 5,000 tons and with 
sufficient speed and steaming radius to enable them to accompany 
a squadron of battleships. There should be five such colliers for 
each squadron of eight battleships with its attending cruisers. A 
number of colliers of less speed and carrying capacity would also 



NATIONAL BUSINESS CONGRESS 41 

be needed for keeping the coal supply replenished at the various 
coal depots, and for other purposes. Ammunition ships of about 
4,000 tons carrying capacity would be required for the purpose of 
replenishing the ammunition supply of the fleet with reserve ammu- 
nition in case of contemplated action. There should be one such 
vessel for each squadron of eight battleships with its attending 
cruisers. A number of transports would also be needed by the 
Xavy Department for the transportation of a force of marines for 
the establishment and defense of advanced naval bases. Each trans- 
port should be capable of carrying at least one battalion of marines 
with complete outfit of field and camp equipage. 

"Another benefit which would accrue to the navy from a large 
fleet of American-owned merchant vessels would lie in the large 
number of experienced sea-going men, engineers and firemen, accus- 
tomed to marine engines and boilers, who would form a valuable 
reserve from which to draw the men for manning the auxiliaries." 

I have just quoted the exact words of Admiral Dewey. This is 
not only his sentiment, but I believe it echoes the thought of every 
man in the navy who has given this subject any study. Admiral 
Sperry says that in the cruise of the American fleet around the 
world: "I did not once see a merchant ship flying our country's 
flag. We had to depend upon foreign colliers, and when they failed, 
had to buy coal at high prices." 

President Taft says that "if we were compelled to go into a 
war today, our merchant marine lacks altogether sufficient tonnage 
of auxiliary unarmed ships necessary to the proper operation of the 
navy." 

I might keep you here all night quoting from very responsible 
authorities along this same line, to show the weakness of our pres- 
ent navy in this connection. During the brief engagement of the 
Spanish-American war, we were compelled to go out and buy ships 
to augment our navy, and pay ridiculous prices, taking whatever we 
could get. But today we could not even do this in case of war, 
owing to the treaties which most of the nations now have with 
each other. What right have we to build any more great battle- 
ships, when we do not provide the auxiliaries which are so essential 
to them? The way we are equipped at present, we have enough 
auxiliaries for two squadrons of eight battleships, and so the bal- 
ance of our navy would be practically useless if we could not pur- 
chase auxiliaries, which is quite unlikely. Therefore the statement 



42 NATIONAL BUSINESS CONGRESS 

that I quoted previously, of one of the Congressmen, that in case of 
war we would better destroy our battleships to prevent the enemy 
from capturing them and using them against us does not seem so 
ridiculous, if we analyze the true situation. Not only have we no 
auxiliaries for our navy, but we have no transports for our army. 

Now, what is the condition today? We are paying out mil- 
lions to train foreign seamen and build auxiliary ships for our 
enemies to use against us in time of war, instead of training our 
own seamen and building our own ships. The American sailor is 
practically extinct because we have practically no merchant marine. 
We cannot even get seamen for our present navy, notwithstanding 
we are offering more inducements than ever and are advertising 
for seamen all over the country. And I will tell you why this 
condition exists. The life on a battleship after the excitement of 
the first few months has worn off is most desultory and unattrac- 
tive. It is entirely too monotonous and the men are too long away 
from home. There is plenty of discipline but no action, and men 
who go to sea usually go to get excitement, and they soon become 
disappointed and dissatisfied. 

During the Boer war the merchant marine of England was of 
inestimable value. How quickly she transported an army down 
there ! The seamen and officers on her merchant marine were well 
trained and there was scarcely a moment's delay. The ships were 
quickly converted into auxiliary cruisers and sent down to Africa. 
Russia's defeat by Japan was surely attributable to her lack of a 
merchant marine, and she and the United States are the only great 
nations that lack a suitable merchant marine. It was Japan's mer- 
chant marine that so quickly transported the vast army into Man- 
churia, and even America used to great advantage the few ships 
she impressed into service during the Spanish- American war. Why/ 
today we are even dependent upon foreign steamships, which are 
the auxiliary cruisers of foreign navies, for the means of com- 
municating the instructions of our government to our military and 
civil authorities in the Philippines ! 

I feel that I am wasting your time with all these details which 
are intended to show you the necessity of a merchant marine, both 
for the commerce and for the safety of our nation, and I think that 
what you wish to know is, what remedy I can propose to meet the 
situation. 



NATIONAL BUSINESS CONGRESS 43 

First, I shall touch briefly upon the remedies already proposed 
during the last quarter of a century while this subject has been 
under the serious consideration of our nation. 

Three plans have been exploited, known as the free ship, the 
discriminating duty, and the ship subsidy, and each of these has 
had many followers. The free ship plan I do not consider feasible, 
for the reason that we have practically free ships today, for under 
the Dingley tariff, materials for the construction of ships for for- 
eign commerce are admitted free. The reason especially that the 
free ship plan has not succeeded in building up a merchant marine 
is probably that foreign ship owners find it much cheaper to operate 
ships under a foreign flag with foreign seamen, because the scale 
of wages is so much lower on foreign ships than it is on American 
ships, and this reason was steadily advanced by ship builders when 
Congress made an investigation of the subject of free ships, and it 
is reasonable to suppose that financiers who are going to operate 
a merchant ship will operate under foreign flags so long as the great 
difference exists between wages, and even if they were inclined to 
be philanthropists they could not compete with foreign ship own- 
ers with this great difference against them, for the work that sea- 
men do is merely mechanical and the foreign seamen can do it 
probably as well as the American, if not better, especially on account 
of their experience. Merchant ships engaged in over-sea commerce 
operating under the American flag were transferred to a foreign 
flag on account of this difference in wages. 

In 1904 a Merchant Marine Commission was appointed to in- 
vestigate the subject of a merchant marine. I have carefully read 
the account of this investigation. During the discussion of the ques- 
tion of the effect of free ships, large American investors in foreign 
steamships were asked if they would fly the American flag over 
their vessels if the United States admitted foreign built ships free 
of duty, and they answered they could not afford to give up the 
advantage of cheap foreign labor. This in a nutshell is the answer 
to the thought of building up a merchant marine by the free ship 
plan. 

The discriminating duty plan suggested quite frequently is not 
practical, first of all because of our commercial treaties with thirty 
nations, which specifically prohibit both discriminating custom duties 
and tonnage duties, and even if we abrogated these treaties a year's 
notice must be given. If we did this, these nations would unques- 



44 NATIONAL BUSINESS CONGRESS 

tionably retaliate by placing discriminating duties on our exports of 
manufactures and agriculture. When discriminating duties were 
practiced by our country over a hundred years ago, we imported far 
more than we exported. Today the balance is in our favor, so that 
discriminating duties would be very injurious to us and foreign 
retaliation would hurt us greatly. There is another and a more 
serious condition. About one-half of the commodities we purchase 
and consume from abroad are on the free list. Inasmuch as these 
articles that are on the free list are principally foodstuffs and raw 
materials, the nation would never tolerate a discriminating duty 
being placed on any of these articles, for this would only tend to 
increase greatly the cost of living, for everybody knows that any 
additional duty is added to the selling price to the consumer when 
the article is eventually sold. The proportion of articles imported 
now on the free list is steadily increasing. If a discriminating duty 
is put only on articles not on the free list, it would not be attractive 
enough to encourage American shippers to engage more largely in 
commerce, for with many of the countries as high as ninety-eight 
per cent of our imports are articles now on the free list. 

I will give you a few statistics of our principal imports for 
this year, 1911 : 

Sugar, $105,000,000; chemicals and drugs, $95,000,000; coffee, 
$84,000,000; hides and skins, $80,000,000; India rubber, $25,000,- 
000; cotton manufactures and raw silk, each about $65,000,000; 
fibre manufactures, $55,000,000; wood and manufactures, $50,000,- 
000; fruits and nuts, $40,000,000; block and pig tin, $40,000,- 
000; diamonds, $33,000,000; copper manufactures, unmanufactured 
fibres, iron and steel manufactures, silk manufactures, leaf tobacco 
and oils, each about $30,000,000; art works, furs and fur skins and 
wool, about $25,000,000 each. 

The discriminating duty plan was also carefully gone over by 
the Merchant Marine Commission. Our treaties with other nations 
contain important commercial clauses aside from the tonnage taxes, 
and to abolish them and then re-negotiate on terms as broad and lib- 
eral as the present ones would probably not only be a formidable 
undertaking, but would take many years to accomplish. A tonnage 
tax would only result in the tax being added to the rate and an 
increase in the cost of the imported articles to the consumer. For 
these reasons I do not think this country will ever pass a law levy- 



NATIONAL BUSINESS CONGRESS 45 

ing discriminating duties on all goods brought into this country on 
foreign bottoms, or a tonnage tax for the same purpose. 

Njow the plan that is generally admitted as infinitely superior 
to either the free ship plan or the discriminating duty plan, and one 
that almost passed both Houses of Congress, and so came very 
near to being enacted into a law, is the ship subsidy plan. This plan 
especially have I given the most careful and earnest consideration, 
if for no other reason than the one that many of the best minds and 
the most experienced men of this country during the past quarter 
of a century have been firm advocates of this plan. If we could 
secure a merchant marine by no other plan than that of a ship 
subsidy I would bow to the inevitable and accept it, so anxious am I 
that this country should have at once a merchant marine, but I 
fear the Congress will never enact into law the ship subsidy, except 
as a last and only resort, for the prejudice against this plan seems 
to be getting stronger. 

1 am principally opposed to the ship subsidy because the mer- 
chant ships of the world are in the hands of a gigantic combina- 
tion, and so strong is this combination, that it is generally under- 
stood that even the American ship subsidized steamers on the Pa- 
cific have joined it and are making the rates for the transportation 
of merchandise prescribed by the conference ; so you see that even 
with a subsidy these ships cannot compete with this pool. Now, if 
we pass a law giving a subsidy to certain ships operating under the 
American flag, they will operate only so long as they can compete 
against this pool, and when they cannot, they will either secretly 
join this pool, or come back to the nation for an increased sub- 
sidy; and this might keep on indefinitely, for this trust could afford 
to carry goods at a loss where it came into competition with the 
few ships that would come out under the subsidy plan, for the 
profits of the trust are enormous and it would never quit while it 
had a leg to stand on, in its attempt to ruin its competitors. This 
has been its policy in the past, and that is why the ship owners 
who were not in, and who at first refused to join, came in finally in 
self-defense. Even if I am wrong (but I do not think I am) I am 
opposed to this nation paying out millions of dollars in subsidies for 
a merchant marine that would be under our supervision only nomi- 
nally, because I am not convinced of the necessity for doing so. 
The only reason why I might think well of the ship subsidy plan 



46 NATIONAL BUSINESS CONGRESS 

is that it is better than no plan at all, and infinitely better than no 
merchant marine. 

During the debates on the merchant marine in the United 
States Senate in 1908, the records show that the three steamships 
on the Oceanic Line, formerly plying to Australia, at that time were 
laid up in the harbor of San Francisco, being unable, although sub- 
sidized for mails by this government, to compete with foreign ves- 
sels. This, it seems to me, is an unanswerable argument against a 
ship subsidy. 

There is another reason why I think we are wasting time, and 
in the end we will accomplish nothing, if we consider any further 
a ship subsidy. It has been consistently defeated in Congress for 
many years, in the first place. In the second place, Mr. B. N. Baker, 
of Baltimore, who was formerly president of the Atlantic Trans- 
port Company, which company sold out to the ship trust, has been 
attempting to organize a new company with fifteen millions of 
capital, to carry the mail between the American ports upon the com- 
pletion of the Panama Canal. This company was to be independent 
and free from all alliances with railroads, and if it could have been 
floated, would have been able to make reasonable ship rates for 
transportation by taking advantage of the Panama Canal. But even 
with Mr. Baker's broad experience and splendid standing in the 
steamship world, he had to abandon his plan, because it was impos- 
sible for him to raise the fifteen millions required to construct a 
fleet of fifteen ships, for the financial powers who are heavily inter- 
ested in the ship trust made it impossible for him to raise the money. 
Mr. Baker is probably the one man in this country, outside of those 
interested in the ship trust, who might be able to bring about the 
construction of an independent merchant marine. But even if he 
had succeeded in floating his enterprise, I am sure that it would 
have been only temporary, for the ship trust would either gobble it 
up as soon as it began to vigorously compete with it, or it would 
force the company to maintain the same rates. 

Now as to my proposed plan. I suppose that it, too, will re- 
ceive much opposition. I shall only ask that that careful considera- 
tion be given it which I have given to the other plans proposed. 
It has at least, I think, the merit of being a new one, but I hope it 
will not be condemned on that account. 

Our nation has a naval organization comprising about 3,000 
officers and 50,000 seamen. Our equipment consists of about 225 



NATIONAL BUSINESS CONGRESS 47 

battleships. We own the greatest water highway in the world, the 
finest seaports and docks and harbor facilities of any other nation, 
as well as the most navigable streams. Our ship yards are equipped 
as well as those of any other nation. Our executive department is 
thoroughly organized, and consists of a Secretary of the Navy and 
assistant secretaries, an admiral and rear admirals, captains, com- 
manders, lieutenants, ensigns and other officers. This naval depart- 
ment is well organized, and fortunately politics rarely enters into it. 
Besides the officers mentioned, there is a general board, and bureaus 
of yards, docks, navigation, ordnance, construction and repairs, 
steam engineering, supplies and accounts, medicine and surgery, 
naval intelligence, hydrographic, naval and medical examination, 
board of observation, retiring board, medical school and dispen- 
saries, general inspectors and pay corps; and each of these depart- 
ments is governed by a head. To maintain this great organiza- 
tion requires an annual outlay of $130,000,000, and each year this 
amount will be vastly increased with the addition of each new bat- 
tleship. Now the people's extremity is the nation's opportunity, 
and the extreme need of a merchant marine to carry our com- 
merce as well as to protect our battleships is surely the nation's 
opportunity, so what more natural than for the nation to come 
forward in this extremity, as all other measures that have been 
suggested have failed, and say : "We have today a great naval 
organization, and as the merchant marine is to be an auxiliary to 
our navy, why not build it ourselves and control and operate it?" 
This nation is bound to protect its people at any cost, but I am sure 
that my plan is altogether feasible, and besides may not cost the 
nation a dollar. 

First, let me tell you the advantage of a merchant marine con- 
trolled by our government, and then I will tell you about its opera- 
tion. First of all, I will take up the protective advantages. A mer- 
chant marine owned by our government would enable it to build 
ships on designs modeled and approved by our navy so that they 
could be promptly converted into auxiliary cruisers in time of war. 
These ships would always carry a number of American boys who 
would be trained in seamanship and would be manned by experi- 
enced sea-going men. These crews, visiting the different ports of 
the world would become familiar with the coast defenses of other 
nations. The government controlling these ships could transfer its 
officers and crews from its merchant ships to its naval ships and 



48 NATIONAL BUSINESS CONGRESS 

thus give the crews of both opportunities and experiences which 
they would not have if the merchant marine were not owned and 
controlled by the government. To illustrate this, today the gov- 
ernment has great difficulty in getting seamen for the navy. Previ- 
ously I have stated what I consider the main reason for this. Now 
under the proposed plan the government can take men off battle- 
ships and transfer them to the merchant marine, thus giving them 
an opportunity of leading a more active and exciting life, and al- 
lowing them to get home oftener, which would be a great induce- 
ment. This would also tend to break down the class prejudice that 
now seems to exist in our navy, and I am sure would make our 
navy much more effective. It has taken many years and much 
money to bring our navy up to its present standard, and I am sure 
that the addition of a merchant marine would inspire the navy with 
new life. This plan would result in building up a great force of 
experienced seamen that we could use in an emergency instead of 
building up an auxiliary navy for a foreign nation. The $30,000,000 
which we expend annually for harbor improvements would be spent 
for our own benefit instead of for foreign ship owners, and instead 
of paying right back in freight rates the money that we take in 
for our exports in excess of our imports we would pay this money 
to American labor. Instead of allowing a foreign pool to make 
the freight rates for American shippers, if we controlled our mer- 
chant marine we would see that no discrimination was made against 
the American shipper, and in case of war between any of the great 
shipping nations instead of having our commerce paralyzed, as we 
would have it under present conditions, on account of inability to 
secure ships for our commerce, we would go right on attending to 
our business and shipping the exports of our own nation on our 
own bottoms. Instead of building more battleships when we have 
not enough men to man our present equipment and hardly any aux- 
iliaries for our present navy, we would build a merchant marine 
which would augment our navy, and the price of only two battle- 
ships would give us a merchant marine to ply between our country 
and South America, at least on the east coast, and this would be a 
fair start. 

Now, then, to sum up the subject: My plan simply means that 
the government augment its present naval department with auxili- 
ary or merchant ships ; that it use such portion of its present organi- 
zation and seamen that is considered desirable, simply making the 



NATIONAL BUSINESS CONGRESS 49 

merchant marine a department of the navy, just as it recently made 
the postal savings banks a department of the postoffice ; that it trans- 
fer officers and seamen from one service to the other whenever it 
appears that the service will be improved by such changes. As the 
government now has practically all the overhead, the additional 
expense of operating this merchant marine would be quite small 
comparatively, and we could make such freight rates and furnish 
such communication that would encourage our manufacturers to 
export, and could make such rates to our sister republics in South 
America that would encourage them to trade with us more gen- 
erously, which I am sure they would gladly do, for we are closer to 
them politically and geographically than any other nation, and we 
certainly should be closer to them commercially. In order to en- 
courage this commerce, even if the government operate at a loss in 
carrying this freight, its loss would not involve nearly as much 
money as the amount it would have to pay out in ship subsidies, or 
for the transportation of the mails, which is only another name for 
subsidy, for the difference between the American scale and the for- 
eign scale that it would pay in wages it would save in overhead, as 
against foreign competition. 

Now, as to the ability of the government to operate the mer- 
chant marine : it would be one of the simplest duties the government 
would perform. It has had much experience in building ships, and 
certainly it could design and build the ships it would require. It 
would simply add to its present crew in the manning of the ships 
and establish a tariff as low or lower than the ship combine now 
makes to its foreign shippers. The rest 'is only a matter of account- 
ing and simple honesty. 

Now I expect opposition to this plan from two sources. First, 
from the unpatriotic Americans who are interested in foreign ships 
and who would see in this move the ultimate upbuilding of a great 
merchant marine entirely owned by our own nation and success- 
fully competing with the ship trust, for the government is the only 
institution that can successfully compete with it, now that it has 
been allowed to reach such gigantic proportions. Second, opposi- 
tion from those who will tell you that this will put the govern- 
ment in business, that this is paternalism, or socialism, or some other 
"ism." But what if it does put the government in business? Let 
me read you from the constitution : 



50 NATIONAL BUSINESS CONGRESS 

"We, the people of the United States, in order to form a more 
perfect union, establish justice, insure domestic tranquillity, provide 
for the common defense, promote the general welfare, and secure 
the blessings of liberty to ourselves and our posterity, do ordain 
and establish this constitution for the United States of America." 

Now that is just our situation today, and I want to substitute 
for the word "constitution" the words "merchant marine." May I 
read it again? 

"We, the people of the United States, in order to form a more 
perfect union, establish justice, insure domestic tranquillity, pro- 
vide for the common defense, promote the general welfare, and se- 
cure the blessings of liberty to ourselves and our posterity, do 
ordain and establish this MERCHANT MARINE for the United 
States of America." 

Our situation today appears to me just as serious as it did to 
our forefathers when they wrote the constitution. 

If this plan were given a fair trial, I am sure it would suc- 
ceed, and we would quickly add more ships, as the demand for them 
would be so great. If this plan were given a fair and unprejudiced 
trial, I am sure it would never be abandoned, but would be a great 
success. Our government today is engaged in business more exten- 
sively than any corporation in the world, and this department would 
surely not be as complicated or as difficult as its postoffice or its 
treasury, or in fact, any of its other departments. 

There may be some opposition from those that will claim that 
the government operates with less economy than private individuals 
can. I grant that as a general proposition this is true, but if we 
cannot get a private individual to give us what we need, just as we 
found it necessary to engage in the postal savings bank business, in 
order to better protect the savings of our people, so we must engage 
in the merchant marine business. As far as economy of operation 
of a merchant marine is concerned, I am not prepared to grant that 
a private owner can operate as cheaply as the government can, even 
allowing liberally for so-called governmental extravagance, for much 
of the great overhead charges which I have before mentioned and 
which this government must maintain, with or without a merchant 
marine, would have to be furnished by a private owner, and he 
could not furnish all that and still operate as economically as the 
government could, even allowing for waste. 



NATIONAL BUSINESS CONGRESS 51 

Just as a great department store adds another department with- 
out materially increasing its overhead charges, so the government 
could add this department in the same manner. The talk about the 
government going into business arises either from a selfish motive 
or from sheer sentiment, and neither ought to have any great 
weight in so important a business proposition when the commer- 
cial life and safety of the nation is at stake. The people select their 
servants just as the employer selects his employe, and the people 
must sooner or later realize that commercial honesty and integrity, 
both in governmental and private enterprises, must be paramount, 
if a nation shall succeed, and as the nation's responsibilities increase 
it will demand greater integrity of its employes. 

Yet another source of opposition may be from the naval offi- 
cers. Some may feel that it is beneath the dignity of a naval officer 
to be connected with trade. Good! If that is the sentiment, let us 
get at it and uproot it. The naval officer is made of no different 
stuff than any other employe of the nation, and if the exigency of 
the time require his engaging in trade to assist his government, and 
his patriotism be not equal to the test, we would better get rid of 
that class and democratize our navy. This process of houseclean- 
ing would unquestionably make a great improvement in our navy, 
for if some of our officers find themselves too busy attending pink 
teas, to take off their gloves and dress coat and do some work for 
the government which supports them, I think it time to take off 
their epaulettes and let them try the pink tea route exclusively and 
see what it will yield them in the way of sustenance. But I can 
hardly believe that there will be any considerable opposition from 
that source. 

I wish to quote now from a letter from the admiral of the navy, 
George Dewey. He says : "I think your plan is feasible ; and if 
you can induce Congress to think so, this movement, which has re- 
ceived numerous discussions by Congress and individuals for some 
time, will perhaps ultimately be put into effect." 

I think that this sentiment echoes the thought of our naval offi- 
cers, and would be re-echoed down to the seamen. 

Before I close, I would say this — another question may arise in 
your mind — you may ask: "If you are opposed to a subsidy be- 
cause the trust would cut prices and then the subsidized lines would 
either go out of business, or join the trust, or come back for more 
subsidy, why would not the effect be the same, if the nation com- 



52 NATIONAL BUSINESS CONGRESS 

peted with the trust?" My answer is, the nation is backed up by 
a hundred million people. It will spend millions for defense. Let 
the trust beware! Gentlemen, I thank you. (Applause.) 

The Chairman: Is there any discussion of the subject? 

Mr. E. Clarence Jones (of New York) : On my own initia- 
tive, I think it would be timely, on this, the first day of this Con- 
gress, to say for myself, that it seems to me that it has been fully 
shown that there is nothing that can better promote the business 
interests of the country than this sort of a forum. I think the 
organization, in establishing this, has done a great work. The only 
question is, can it continue it? It seems to me that if we think 
over the next two days what I am to suggest, a plan may be evolved 
whereby these discussions of this forum may be continued. There 
are at least five hundred active commercial organizations in the 
country. If all of those five hundred were invited to join, to co- 
operate in this work, to hold an annual congress, to participate in 
its discussions, and were asked to contribute a small sum for that 
purpose, I think they would all do it. Personally, I am very anxious 
to see these discussions continued. I have been so interested today, 
and I only speak now for the reason that it seems to me that it will 
give us two days to think it over and decide whether anything can 
be done along these lines. 

I would like to say that the organization that I represent would 
be glad to subscribe annually, and I am sure there are other mem- 
bers here from other organizations who will feel and speak for 
their own organizations the same way. 

' The Chairman : I thank you, Mr. Jones. 

Mr. Frank D. Pavey (of New York) : Mr. Chairman and 
Gentlemen — I was very much interested in one part of Mr. Rosen- 
thal's paper, because he compared the better shipping facilities be- 
tween Europe and the east coast of South America. It happened 
that last year, in connection with business, it called for a great deal 
of economic investigation. I happened to go to the Argentine Re- 
public. Like every American going from home, and remaining 
for months, when business has been finished, I was in a hurry to 
get home. When I looked for the quickest way to get from Buenos 
Ayres, I found that if I would take the fast Italian boat into the 
Mediterranean, and then to Barcelona and into Spain, and then a 



NATIONAL BUSINESS CONGRESS 53 

fast steamer from Freiburg, I could get home from three to four 
days earlier than over any other route. 

But I think that is not a question of subsidy. I think it is a 
question of trade, and, in order to state my conclusions before I 
give the reasons for them I will say that if Mr. Rosenthal, as a 
promoter, would like to establish an American steamship line to ply 
between New York, or any port in the eastern coast of the United 
States and the Argentine, the most practicable method by which he 
could do that would be to get the Beef Trust and the Harvester 
Trust to unite in the construction of that line of steamboats. Of 
course, that suggestion is not immediately practicable, because of 
the uncertainty as to how many of the Beef Trust will be left out 
of jail, but my reason for making the suggestion is this: It is 
only a question of time, and not a very long time, until America will 
cease to supply England with meat products. The falling off has 
been so great as to be noticeable, not only to the men who are par- 
ticularly interested, but to other men as well, and the reason for 
that lies at home. With the settlement of this great interior coun- 
try, and the building up of cities and villages of greater and greater 
size on the plains, the plains are gradually being cut up, and, with 
the cutting up of the plains, the great herds of cattle and hogs from 
which the Beef Trust drew its supplies to ship to England are be- 
ing cut up or driven farther to the borders and into Mexico. 

With the Beef Trust, all of the different groups that constituted 
the Beef Trust have, of course, for many years, had an elaborate 
selling organization in England, which is practically the only coun- 
try in Europe in which they can sell beef. Their lack of supplies in 
this country, due to the high prices and small production, has led 
them to go to the Argentine in order to get the supplies to furnish 
to the English. Prior to their advent in Argentina there were Eng- 
lish Companies there, but the people usually designated as the Beef 
Trust had to disband their organization in England or go to the 
Argentine for their supplies. Swift purchased one plant there. 
The National Packing Company purchased another, Armour and 
Schwarzschild & Sulzberger have all purchased land there with a 
view of establishing plants there. They have the reputation there 
of being more successful in the meat packing business than either 
the English or the natives. In fact, the natives are a distinct fail- 
ure, and it is practically left to the English and American packers. 
The Americans are credited with knowing better how to utilize all 



54 NATIONAL BUSINESS CONGRESS 

the by-products of the business and to make money where native 
plants have failed. Of course, that may be due to the fact that 
they had very much better selling organizations already established 
in England, but their success is not doubted. The principal diffi- 
culty about an American steamship line between New York, say, 
and Buenos Ayres, is the question of a return cargo, and the Eng- 
lish shipping men maintain that it is perfectly absurd to talk about 
an American subsidy that will be sufficient practically to take the 
place of a return cargo. 

While, of course, there are products of the Argentine and 
Uruguay which come to this country, of which hides is a great one, 
they do not constitute the great export products of those coun- 
tries, the great exports, beef, grain, etc., being the principal ones. It 
is my judgment that the time will come when the Atlantic seaboard 
will receive both grain and beef from the Argentine, but that is 
somewhat remote. A ship that goes from here to the Argentine 
has no certainty of a cargo on the return trip. In going from Eng- 
land they have a certainty that if they will equip themselves with 
the proper refrigeration for beef and mutton they will always 
go back loaded. I am told that that is practically why there is no 
steamship line between Buenos Ayres and the Atlantic seaboard. 

I was told that American agricultural implements are better 
liked than any other make, where they have an opportunity to get 
in on anything like the same price. In fact, I have been told in 
England that small agricultural implements made in America are 
considered far superior to their own make, because of the superior 
finish and superior workmanship, but it is certainly true in South 
America. The importers of machinery in South America say that 
the higher freight rates particularly make it impossible for them to 
import American agricultural machinery and sell it to the entire 
exclusion of machinery from other countries. But the agricultural 
machinery and the agricultural implements are greatly liked. I am 
not a practical shipping man, but it seems to me that if the Beef 
Trust and the Harvester Trust could establish a steamship line and 
carry agricultural implements from the Atlantic sea coast to Buenos 
Ayres, and then meat products from Buenos Ayres back to England, 
and then, on the return to the United States they would be loaded, 
and make a triangular trip, they could in that way maintain the 
service, and it is my opinion that unless you can work that out, an 
American service between those two points will not be practical until 



NATIONAL BUSINESS CONGRESS 55 

we arrive at the point where the Atlantic seaboard imports grain 
and meat from the Argentine. (Applause.) 

The Chairman : In respect to the gentleman's remarks as to 
the return cargo, ships do cross the Atlantic coming to this country 
for cargo. I have now two ships crossing the Atlantic consigned 
to me, to take a cargo out of this country ; a cargo that I could not 
get the carrying capacity for, and those ships will be loaded within 
the next sixty days. If we are to get our products into foreign 
markets successfully, economically and expeditiously, we have some- 
thing to do besides the inauguration of a merchant marine. In 
other words, we must have a better Consular service than we have 
at the present time. Our Consular service has been materially im- 
proved during the last three or four years, but there is certainly 
room for greater improvement. 

We have with us today a gentleman who has been a consul, 
who has gone through the examination for consularship with great 
credit, and he will tell us what he knows about it. 

Gentlemen of the Congress : It is my pleasure to present Dr. 
Samuel MacClintock, formerly of the University of Chicago and 
recently of the American Consular Service. 



THE AMERICAN CONSULAR SERVICE, 



By Samuel MacClintock. 



Mr. Chairman and Gentlemen : 

Shall we continue to maintain our consular service ? 

It might seem a waste of time to ask such a question were it 
not for the fact that every now and then some one not acquainted 
with the wide range of consular activity raises the question as to 
whether it would not be just as well to abolish the service alto- 
gether. This last winter when the bill to provide suitable perma- 
nent buildings for our diplomatic and consular officers abroad was 
up in the House of Representatives, Judge Underwood, of Georgia, 
opposed the measure on the ground that the foreign service should 
be abolished entirely. The argument, such as it is, for this view is 
that in this day of rapid communication to all parts of the earth, 
negotiations can be carried on between interested parties directly, 



56 NATIONAL BUSINESS CONGRESS 

whether they be governments or individuals, and without the media- 
tion of agents, except when special situations arise. 

Happily this view does not obtain generally. The consensus 
of opinion among manufacturers, exporters, travelers and especially 
among our citizens residing abroad, is that the consular service is a 
very valuable aid to commerce and that it should at once be placed 
by law upon a permanent merit basis and improved and extended 
so that its value would be still further enhanced. The judgment of 
the country is overwhelmingly in favor of placing the service upon 
such a basis as will remove it entirely from the pernicious effects of 
the spoils system, and it is only a question of time until Congress 
will recognize the insistence of this righteous demand, and write 
into our statutes some such law as this League has for years been 
advocating. 

Before taking up the bills relating to the subject, which are to 
be introduced into Congress at this present session, let us see, brief- 
ly, what are some of the distinctive services rendered by our con- 
sular officials. 

Commercial Duties. — It is generally recognized that in order to 
secure foreign markets, it is necessary to have both broad and accu- 
rate knowledge of the peculiar trade conditions existing in differ- 
ent countries, the local customs and tastes, the character of the 
goods demanded, the banking and transportation facilities and the 
prevailing systems of credit. One of the accepted means used by 
all modern governments for promoting such commercial relations 
is that of the consular service. 

This service, in its inception, goes well back into the Middle 
Ages. At first it was not intended so much to render aid to trade 
and commerce as it was to protect the private rights of citizens liv- 
ing or traveling abroad. In modern times consuls have almost com- 
pletely lost their representative character, which has been assumed 
by the diplomatic branch of the foreign service, and likewise, in all 
except a few non-Christian countries, their judicial functions. The 
consular service has thus become distinctly commercial in its char- 
acter. Its great justification at the present time is the aid it can 
render in securing and promoting foreign trade. This service in- 
cludes the bringing about of mutual good will and understanding. 
Consuls may, therefore, at the present time, be regarded as soldiers 
of commerce, or as ministers of commerce, according as they are 



NATIONAL BUSINESS CONGRESS 57 

looked upon as waging commercial warfare or as promoting good 
will and understanding. 

In discussing the service which consuls render to the trade and 
commerce of their country, it may be stated at the outset that they 
cannot create trade, nor can they successfully tell an individual how 
he should establish and carry on his business. They can, however, 
make broad, sound observations on the products and commercial 
possibilities of a particular country, its financial and industrial con- 
ditions and the tendencies of its trade, the local usages and require- 
ments, commercial statistics, and the steps necessary to be taken if 
one wants to enter upon a particular field; also, the scientific dis- 
coveries and progress in the arts, the encouragement given to tech- 
nical and commercial education, the methods of advertising, and 
other helps and suggestions. Such information is of the utmost 
importance to the exporter who wants to get into the foreign mar- 
ket and cannot afford to make an exhaustive investigation on his 
own account. Again, consuls can do much to promote good will, 
break down local prejudices and smooth over difficulties with gov- 
ernment officials and local dealers. Such services as these, and not 
the rendering of direct personal assistance to those engaged in for- 
eign trade, is the true field for consular endeavors. In addition to 
the general lines of information mentioned, consuls acquire much 
valuable knowledge relating to individual business propositions, such 
as a knowledge of particular markets, business connections, details 
of delivery and payment, salesmanship and the protection of trade- 
marks and copyrights. 

Our consuls are called upon by the government to make a 
great variety of reports, dealing w T ith the subjects just mentioned 
and many others. These are issued as annual, quarterly, monthly, 
daily and special reports, and may be had of the government upon 
request. They are of value as showing the general conditions prev- 
alent in the consular district and the possibilities of new or further 
extensions of trade. 

The reports upon tariff and customs regulations are of especial 
assistance to those engaged in either importing or exporting. By 
prompt notice of important changes and pending legislation of this 
character, much time and money have often been saved. This has 
been particularly true with regard to Latin America, where the cus- 
toms regulations are subject to frequent changes and where rigid 
compliance with the exactions is often necessary to avoid heavy 



58 NATIONAL BUSINESS CONGRESS 

delay and loss. The reports of this character also show how the 
local requirements may be met in such a way as to save friction 
with the government authorities. They also point out practical 
expedients by which shippers may save money. Thus they have 
shown that products with metal parts sent to Russia or Germany 
should have the different metals packed separately, so as to avoid 
paying upon all in accordance with the highest class article in the 
package. 

The consular service renders valuable aid in protecting our 
customs revenue. The certificate of the consul at the port of ship- 
ment verifies the correctness of all invoices of goods destined for 
the United States. This duty presupposes an extensive knowledge 
of general values and of the state of trade in the consul's district, 
such as can be acquired only by close study as well as by a wide 
familiarity with local conditions. 

The use of ad valorem duties in our tariff system renders the 
temptation to the undervaluation of the imported goods very strong, 
and this may result in severe loss to the government. This is espe- 
cially true of highly manufactured goods, such as form a consider- 
able part of our imports. The value of such goods is difficult for 
any one but an expert in each line of trade to know. The system of 
undervaluations, long practiced, especially by the European export- 
ers, worked to the decided injury of their American competitors, 
who were finally almost driven from the field. By shrewd and per- 
sistent efforts of our consular officers, especially in Switzerland and 
Germany, such unfair methods, in at least a few lines, were finally 
exposed. It has been estimated that the savings resulting to the 
government alone amounted to over a million dollars a year, while 
checking the tendency to dishonest invoicing has of itself done much 
to establish fair conditions in trade. The almost complete failure 
recently of our consuls to ascertain with any measure of exactness, 
the cost of producing foreign goods shows how difficult is the 
undertaking, and the lack of funds with which to make public such 
parts of the reports as were of practical value shows the handicaps 
the service is under. 

A special class of reports deals with the preparation and inspec- 
tion of food products for foreign markets. European countries have 
Sometimes passed stringent measures against our meats and fruits 
particularly, on the ground of protecting the public health, though 
in reality often prompted by the fear of competition. Consuls have 



NATIONAL BUSINESS CONGRESS 59 

been able at times to show the unreasonableness of such actions, and 
especially to show that no injurious results could possibly follow 
the violation of such formal regulations as that of the French gov- 
ernment requiring canned goods to be sealed with solder of pure 
tin only. 

Another class of reports deals with the demands of the local 
markets. The people of all countries have their national customs 
and preferences, and any one who wishes to supply their demands 
must be willing to adjust his products to such requirements. This 
applies not only to the goods themselves, but to the means used in 
making sales and payments. Our manufacturers have not infre- 
quently shown great indifference or even positive unwillingness to 
vary their patterns or standards in order to meet the needs or 
prejudices of the foreign consumer, while our European competi- 
tors have shown commendable willingness to do so. Knowledge 
of the peculiar requirements of different countries, and a willing- 
ness to meet them, are necessary, however, if an extensive foreign 
trade is to be built up. A trade built upon such a reputation is hard 
to shake, especially in conservative countries. 

The reports also indicate how the trademarks may advantage- 
ously be made to conform to the native tastes. Thus, "in India a 
rampant leopard is popular ; in China, dragon figures ; in Uruguay, 
marks of a religious character, like the Star of Bethlehem ; and in 
Sierra Leone, certain vines, trees and animals formerly worshiped 
by the natives and still held in great respect." The English have 
made great success with the cotton trade in Japan because they 
have made designs based upon specimens of old Japanese art. 
These illustrations will suffice to show how consuls can aid the 
foreign trade by pointing out to manufacturers the local peculiari- 
ties and requirements. 

Reports of another class have a considerable though tempo- 
rary value. Thus, a widespread crop failure, destructive flood or 
other public calamity may open up a profitable field for exports, 
and notice of great public or private works soon to be undertaken, 
such as the buying of government supplies, often results in the con- 
tracts being secured by our own firms. Consuls have reported 
upon harbor improvements, extension of railroad and steamship 
lines, opening up of new districts to trade, and by their efforts have 
sometimes secured the establishment of better banking facilities and 
direct steamship communication. 



60 NATIONAL BUSINESS CONGRESS 

Our consuls have made many valuable suggestions as to 
methods of doing business in the various countries. One of the 
most important of such suggestions is that connected with credit. 
With us cash payments or short-time obligations are customary, but 
in Europe, South America and the Orient, long credits are usually 
given. The European traders have shown much greater willing- 
ness to recognize the conditions, whatever they might be, and to 
accommodate themselves to the local customs than have we Ameri- 
cans. This, together with the long credits made possible by the 
backing of the large German banking houses, is given as one reason 
why the Germans have been notably successful in South America. 
Consuls also report upon the procedure involved in the collection 
of debts ; they furnish trade directories, and they may even advise 
as to the commercial rating and general standing of local business 
firms, and individuals. 

Many complaints and suggestions have been forwarded by 
consuls as to the manner in which our goods destined to foreign 
markets are packed and shipped. Thus, a gentleman in Chile re- 
cently ordered a large and expensive piece of machinery. When it 
arrived, a small but essential part was lacking. It took months to 
secure the part, and this meant a vexatious delay and loss. 

It is pointed out over and over again in the reports that the 
markings and invoices should always be in the local language and 
in conformity with government requirements; that prices and 
measurements should also be in the local language and for goods 
delivered at the seaboard, in sizes suited to the local means of trans- 
portation. Thus it is manifestly absurd to send heavy boilers all 
set up to an interior point in Honduras, when the only means of 
transportation to the destination is on the back of mules. 

Consuls give valuable advice as to the best methods by which 
trade may be secured in their respective districts. They are for- 
ever pointing out the uselessness of sending catalogues and circulars 
to people who do not understand one word of the language in 
which these are printed. They insist that printed matter, however 
carefully gotten up, can never take the place of branch houses and 
agents who know the language and customs, of the country. They 
advocate the establishment of exhibits of simple manufactures, and 
some of these exhibits have been notably successful. 

Consuls have rendered valuable assistance to our manufactur- 
ers in protecting their patented articles from imitation and subse- 



NATIONAL BUSINESS CONGRESS 61 

quent sale. They have shown how patents, copyrights and trade- 
marks might be obtained, registered and protected. Not infre- 
quently our goods and trademarks have been 'so successfully imi- 
tated in foreign countries as to kill off a promising trade by the 
substitution of an inferior article. American sewing machines 
were practically driven out of the markets of Brazil in this way by 
German imitations. 

In the "Foreign Trade Opportunities," contained in the Daily 
Consular Reports, notice is given of both information and inqui- 
ries on hand accessible to applicants before such reports are pub- 
lished for the general public. This was found necessary in order 
to secure this information for our own citizens first. 

One of the things which struck me as odd while I was in the 
service, and one which I am unable to explain satisfactorily, is the 
fact that salesmen, prospectors and investigators in foreign coun- 
tries do not make more use than they do of local consular aid. I 
know that it not infrequently happens that such agents go into a 
region with whose local history and conditions they are not 
familiar, and yet do not call upon the consul or make any other use 
of the information which the latter is able and willing to furnish. 

It is not contemplated that the consular service should ever 
take the place of private enterprise. Consuls cannot be expected to 
be experts in all lines of industry and commerce, nor can they be 
expected to render active personal service to exporting firms. 
They can, of themselves, neither create nor maintain trade; the 
most they can do is to facilitate it. The producer or exporter him- 
self must go after the foreign trade if he wants it, and all that he 
can reasonably ask of the government is that it give him general 
assistance. Furthermore, no great foreign trade can be built up as 
long as we are contented with the home market in full years and 
look to the foreign market only in off years. The foreign trade 
must be an object in itself and not simply an outlet for the surplus 
of slack years. 

Consular services are, therefore, rendered to a general class 
and not primarily to individuals. This is especially true as to the 
opening up of new sources of trade, and reporting upon general 
conditions. After a business is once established, consuls can then 
render but little direct assistance, for necessarily those intimately 
acquainted with its details are in a better position to judge of its 
requirements than the consular officers can be. Nevertheless the 



62 NATIONAL BUSINESS CONGRESS 

general information furnished continues to be of considerable value 
even to those already in the field, for such matters as opportune 
conditions for the expansion of trade, health regulations, protec- 
tion of patents and trademarks, opening of new routes and lines of 
communication, shortage of crops, the projection of new works 
and changes in the law, do not ordinarily come within the observa- 
tion of those engrossed in any single line of business. 

So far from it being true that the consular service should be 
abolished because "you can do business just as well by writing a 
letter as by sending a man," the whole demand is for better men 
who can report accurately the conditions in the foreign field and 
thus help to establish better commercial relations. There is no 
doubt that if the government fails to provide a strong and efficient 
consular service to serve the general interests of all its citizens, 
large private corporations and chambers of commerce will do so for 
their own benefit. This is what the Chicago Association of Com- 
merce did recently when it opened an office in Buenos Aires for the 
purpose of promoting trade with that rapidly growing part of the 
world. 

Our State Department has been criticised for its recent vigor- 
ous efforts to promote our foreign trade and to secure our share in 
the commercial openings in various parts of the world. The utili- 
zation of our full diplomatic and consular services for these pur- 
poses has been ironically dubbed "dollar diplomacy," just as if the 
securing of such results were not the justification of our foreign 
service. In general, our government has done too little rather than 
too much to help our manufacturers and exporters to secure for- 
eign markets ; and the aggressive and successful efforts of the pres- 
ent administration in this field should receive the hearty apprecia- 
tion of all interested in the extension of American capital and trade 
abroad. 

Legal and Administrative Duties: There is a disposition on 
the part of those who think of the consular service as only an 
agency for buying and selling goods, to fail to take into considera- 
tion certain other very important duties imposed upon our consular 
officers. Thus, they must give attention to our shipping, wherever 
such exists. The care and inspection of ships, their condition and 
sale abroad, the custody of ships' papers, together with the general 
supervision of seamen, including their enlistment abroad, their dis- 
putes, discharges, wages, desertions and relief, all fall under the 



NATIONAL BUSINESS CONGRESS 63 

consular supervision. Again, there are important duties connected 
with immigration and quarantine laws, rules and regulations. 

Among the most important consular duties towards our 
nationals living or traveling abroad is seeing that they get the privi- 
leges and immunities to which they are entitled under the law of the 
country in which they reside ; administering upon their estates if 
they should die intestate ; and viseing travelers' passports. These 
duties are light in the old settled countries of Western Europe, but 
they are the most important which a consul can render to his own 
nationals in any country undergoing serious internal disturbances. 
There is no better way known of developing foreign trade than 
through the permanent location in a foreign country of our own 
citizens. The president of the Comite des Conseillers, of Paris, 
said recently that a country wishing to export its products must 
begin by exporting men — "le commerce suit ses nationaux." Ameri- 
cans, as a rule, have so many opportunities at home that compara- 
tively few of our young men care to seek their fortunes in foreign 
lands. One result of this was recently expressed by the president 
of the American Chamber of Commerce in Paris in the following- 
words : "A source of national weakness has always been that 
American interests abroad are, to a large extent, in alien hands, 
through the lack of men conversant with foreign languages and 
foreign methods of business." Now, it is obviously the duty of a 
country which encourages its citizens to live in foreign lands in 
order to develop commercial relations, to follow these citizens with 
its protecting arm and secure for them adequate preservation of 
their lives and property. Not to do so, is to fail to give its citi- 
zens the care and protection which is the duty of sovereignty cor- 
responding to the correlative duty of obedience on the part of the 
citizen. Our citizens in Mexico, in China, in Tripoli, in Persia, and 
often in Central and South America, while living abroad in the pur- 
suance of legitimate endeavors, look to their government with keen 
solicitude for protection. 

While I was stationed in Honduras, the most disturbed and 
distressed part of revolutionary Central America, there were ap- 
proximately five hundred American citizens in my consular district 
at Puerto Cortes. Some of these were substantial planters ; others, 
day laborers; while still others were sojourning in that tropical 
clime because it was more congenial to them and to their past deeds 
than their own country. Now, these American citizens were often 



64 NATIONAL BUSINESS CONGRESS 

sorely distressed by the unsettled conditions around them. Appeal 
to the courts was generally ineffective. They had to depend either 
upon their own good right arms or else upon the efforts of their 
government to secure them their rights. In such a country as this 
the legal and administrative duties of a consul are more important 
by far than the commercial duties. 

Opinions of Our Service : There is a great difference of 
opinion among our manufacturers as to the value of our consular 
service. Many of those engaged in the foreign trade do not ship 
abroad directly, but make all their sales through commission 
houses ; some do not even avail themselves of the opportunity to ob- 
tain the published consular reports. It is evident, therefore, that 
out of the total number of manufacturers in the country, the por- 
tion that comes into direct contact with the consular work is small. 
For reasons already indicated in part, it is believed that this will 
change rapidly and that the service will be an increasingly valuable 
aid to our commerce. 

The "American Exporter," received some time ago, from 
manufacturers and exporters, 259 replies to an inquiry as to what 
they thought of the consular service. The replies showed that, 
while practically all are engaged in the foreign trade, less than 65 
per cent receive the consular reports, and that only about 40 per 
cent made any attempt to follow up the "Foreign Trade Oppor- 
tunities" there presented. Approximately one-half of these replies 
secured results — a remarkable percentage, everything considered. 
The replies indicated belief in the growing emancipation from 
political influence and the consequent widening value in the strug- 
gle for foreign markets. No wonder, therefore, that in answer to 
the question, "Do you consider the reports of value to American 
Commerce?" practically all replied in the affirmative. 

While these letters were not exactly enthusiastic endorsements, 
they nevertheless indicate ground for hope. In reply to the ques- 
tion, "From what class of men do you think the consular corps 
should be recruited, and what special training should they have to 
be of value to the country's export interest?" the answers may be 
grouped as follows : 

One hundred and one replied that the service should be re- 
cruited from men who have had previous business and manufactur- 
ing experience; twenty that the best material for consular ap- 
pointees is to be found among the employers or principals of ex- 



NATIONAL BUSINESS CONGRESS 65 

porting commission houses ; four advised the selection of traveling 
men who have had foreign experience ; two declared themselves as 
satisfied with the present arrangement; while one urged that ap- 
pointments be made on political and partisan grounds, but, as he 
also suggested the party from which the appointments should be 
made, it would seem that this manufacturer intended his reply to 
be a joke. 

Another correspondent advocated the selection of men of social 
position and independent means. Four suggested nothing more 
specific than "appointments after special training;" four others 
simply said that the consuls must speak the language of the country 
to which they are sent; three favored the appointment of college 
graduates; and two, the graduates of technical schools. One said, 
in a general way, that consuls ought to have a wide acquaintance 
among American manufacturers engaged in the export trade; and 
five emphasized the necessity of increasing salaries so as to secure 
the highest efficiency. 

This opinion is in accord with that expressed by President 
Monroe, who said long ago : "When we deprive our consuls of the 
necessary means to enter the social circle to which they properly 
belong, we reduce them to mere ciphers." 

It is always interesting to see what intelligent foreigners think 
of us. That our service has been good in spots, no one will attempt 
to deny, but Dr. Vosberg-Rekow, a high German official, thinks 
that the remarkable growth in the exports of our manufactures to 
Europe is due, at least in part, to the effort of our consuls. He 
says: "The United States has covered Europe with a network of 
consulates and makes its consuls, at the same time, inspectors of 
our exports and vigilant sentinels who spy out every trade opening 
or advantage and promptly report it." The German agent of a 
large American manufacturing house thinks that our service is still 
inferior, in results produced, to the German system, in which special 
commercial agents are attached to the consulates, but that it is 
superior to the systems of France or Belgium. 

Hozv Make Effective: Our consular service, in the past, has 
merited both the censure and the praise which has been heaped 
upon it. Like other parts of the government service subject to the 
perniciousness of the spoils system, it has recruited to its ranks 
both the competent and the incompetent, both wide awake men of 
good training and practical experience, and a large corps of "re- 



66 NATIONAL BUSINESS CONGRESS 

spectable, indigent gentlemen who have failed at home." Success- 
ful and troublesome local politicians have too often expected to be 
rewarded for their contributions or their exertions in the past cam- 
paign by a soft berth in some foreign country. Nbedless to say 
such appointees did not look forward to a continuous career in 
which intelligent and persistent work would bring retention and 
promotion in the service, but rather to four years of sojourn in a 
foreign country as a reward for their past political efforts. 

The United States continued its consular appointments as a re- 
ward for political services long after this method had been given up 
by the leading European nations. With them a candidate for the 
consular service must almost always be a graduate of some recog- 
nized learned institution, often must have had some experience in a 
commercial house or institution, and then must pass a rigid, com- 
petitive examination. Once admitted to the service, he is free from 
political pressure and can hope for advancement only as a result of 
meritorious service. 

The merit system has much to commend it. It is incompara- 
bly better than the spoils system. It recognizes the desirable prin- 
ciple of selection in accordance with qualification, and promotion 
only in accordance with efficiency. Now, if our legislators would 
only see it, the acceptance of the merit system by them would be 
good politics ; for when a senator or congressman backs one indi- 
vidual for a position, he, of course, cannot put his influence behind 
any other, whereas under the system of competitive examinations, 
he can approve of as many candidates as wish to present them- 
selves, leaving the final selection, of course, to be determined by the 
tests undergone. In this way he needs offend none, while actually 
encouraging and helping the most meritorious. 

But the merit system will not of itself or automatically secure 
competent officials. It is necessary to provide sufficient induce- 
ments, honors, and rewards to make the service attractive to the 
kind of men who are capable of making a worthy success at home. 
One is not ordinarily going to give up the advantages of living in 
his own country and with his own people, particularly when the 
opportunities to make money are as good as they are in this won- 
derful land of ours, if he has to make a pecuniary sacrifice in order 
to do so. At the present "time, the compensation in the two lower 
classes of the service to which appointments are made is only $2,000 
in class 9 and $2,500 in class 8. This is entirely too low. These 



NATIONAL BUSINESS CONGRESS 67 

amounts should be increased by at least 50 per cent. When the 
Chicago Association of Commerce wanted a representative to go to 
South America, it selected one upon a practical merit basis, and 
then paid him an adequate salary. This is the only method by 
which we can get competent men for the government service. 

Furthermore, in my opinion, retiring pensions should be pro- 
vided. This has been found necessary by the older European na- 
tions with their foreign service, and it would be particularly help- 
ful in retaining in our service men who could look forward to a 
life-time career without facing penury when they were ready to re- 
turn home at the end of their service. 

Another very desirable feature is the building of permanent 
legations and consulates in practically all foreign countries. Some 
years ago I was in Hankow, the Chicago of Central China. 
Driving along the Bund, I saw the substantial, permanent buildings 
of the other nations, that of Russia being particularly impressive, 
but when I inquired for the American consulate, I had some dif- 
ficulty in finding it in a little rented house on a side street. When 
I, myself, went to Tegucigalpa, the capital of Honduras, I found 
the consulate housed in a building which I absolutely would not 
occupy. It was only after a long search that I was able, with the 
small amount of money which the Department could provide for 
rent, to obtain a well-located and fairly commodious house. 

I have said nothing so far about the general training for our 
consular officers. Shortly after the impetus given to the service in 
1906, a number of our universities established special courses of 
training for consular and diplomatic, as well as for foreign com- 
mercial positions. Due to the failure so far of Congress to enact a 
comprehensive civil service law relating to the service and to a 
belief in some quarters that the merit principles had been applied 
in a somewhat quixotic way,* this excellent plan for training those 
looking forward to the foreign service has, for the most part, been 
allowed to fall into disuse. This is unfortunate, for our consuls 
need to be men of broad general training and culture above all else. 

The examinations, as laid down in the present regulations, are 
both oral and written, and include the following subjects: Inter- 



* For example, the special examinations and the favoritism shown 
in assignments and promotions, due to political pressure. The loyalty 
and devotion on the part of those actually engaged in administering 
the service, especially the efficient director and the chief of the bureau, 
are deserving of the highest commendation. 



68 NATIONAL BUSINESS CONGRESS 

national law, diplomatic usage, and a knowledge of at least one 
modern language other than English, to-wit: French, Spanish or 
German ; also the natural, industrial, and commercial resources and 
the commerce of the United States, especially with reference to the 
possibilities of increasing and extending the trade of the United 
States with foreign countries; American history, government, and 
institutions ; and the modern history since 1850 of Europe, Latin 
America and the Far East. The object of the oral examination is 
to determine the candidate's alertness, general contemporary infor- 
mation, and natural fitness for the service, including mental, moral 
and physical qualifications, character, address and general education 
and good command of English. In addition to the foregoing sub- 
jects, I would also include a knowledge of the fundamental princi- 
ples of law. No special school need be established to provide the 
training required for the consular service. The universities 
throughout the land teach practically all the subjects mentioned 
above and are able and willing to train candidates, if a permanent, 
high-grade service is securely established. 

And this leads me to say that in my opinion it is unreasonable 
to expect our consuls to be technical commercial experts. If they 
were this, they would not be good general administrative officers. 
Commercial attaches should be connected with all our larger and 
more important consulates, just as they are with those of the lead- 
ing European countries. These attaches are charged with the duty 
of studying how to advance the trade of their countries. As yet, 
we have not followed this worthy practice. The European coun- 
tries also generally have a much larger and better paid staff at their 
consulates than we have. Thus, the German consulate general in 
New York City has a force of thirty persons; in Chicago, seven- 
teen; while in our consulate-general at Berlin, we have but eight 
persons, all told. As a result of this inadequate equipment, our 
consuls are so engaged with the routine work that they have but 
little time for serious study and investigation. 

Governmental Co-Operation : It is not always realized how 
much the effectiveness of the consular efforts depends upon the 
organization of the home office. If this is adequately equipped 
and intelligently directed, much can be accomplished, but if the 
home office does not systematically direct the consular efforts, sus- 
tain their legitimate endeavors and popularize their reports, the 
work in the field will accomplish little. Thus, our European con- 



NATIONAL BUSINESS CONGRESS 69 

suls were recently called upon to report the cost of production in 
their districts. They were, for the most part, unsuccessful in this 
quest for information, but nevertheless did secure much valuable 
material which the home office, through lack of funds, was not able 
to make use of. As with the consular service in the field, so with 
the management and equipment of the home office, there has been 
notable improvement of late. 

In Germany, particularly, the co-operation between the gov- 
ernment and the chambers of commerce is very close and effective. 
This may be due, in a measure, to the fact that in Germany the 
chambers of commerce are semi-official bodies, whose functions and 
activities are strictly regulated by law. They serve as the medium 
through which confidential information as to trade openings abroad 
is communicated to manufacturers and exporters ; and they call the 
attention of the government to the grievances and suggestions of 
the business interests. With us there is practically no provision of 
systematic co-operation between the Department of Commerce and 
Labor and the various commercial and trade associations which are 
most affected by its work. If our chambers of commerce could 
help to disseminate the information which the Department receives, 
and, on the other hand, could advise and inform the Department of 
the needs of the various business communities, much practical ad- 
vantage would result from this co-operation. 

In Germany, the Department of Commerce is presided over by 
a director, who is assisted by several officials, called councilors, each 
of whom is charged with the study of one or more particular sub- 
jects coming within the scope of the Department. Thus, one studies 
transoceanic commerce, and another that of the Far East. The 
councilors are not called upon to do routine office work, but devote 
all their time to securing information relating to their respective 
fields. When the time arrives for negotiating a commercial treaty 
with a foreign country, or of framing a new tariff bill, the council- 
ors are in a position to give authoritative information upon every 
topic of interest to German trade. Probably the most important 
work which the German department of commerce performs for the 
business interests directly, is in connection with the publication of 
foreign tariffs and of consular and trade reports. These are so 
explicit, so carefully gotten up, and so promptly printed, as to be of 
great practical aid. 



70 NATIONAL BUSINESS CONGRESS 

A means successfully used by some European countries and 
Japan for promoting their foreign trade is the maintenance of com- 
mercial and industrial museums. These are often supported, at 
least in part, by public money and co-operate actively with the con- 
sular service. They contain collections of samples of foreign raw 
materials and manufactures. They thus acquaint manufacturers 
with the tastes and demands of the foreign consumer and thereby 
place them in a position to meet foreign competition successfully. 
One of the most popular of such museums is that maintained in 
Belgium. In addition to the collections, facilities are provided for 
communicating directly with the consuls on any subject of interest. 
The replies of the consuls sent in this way have created for the 
museum a place of distinct usefulness. 

We should have such a museum here in our country, and pre- 
ferably right here in Chicago, the great central market. It should 
be housed in an adequate building of its own, filled with carefully 
selected samples of the products of foreign countries of every kind 
of industry, both of the most primitive and of the most advanced. 
The samples should be chiefly of two kinds : the raw materials 
which our own manufacturers or importers can use to advantage, 
and the wonderful array of manufactured goods produced in this 
great industrial region. A museum of this kind should gather such 
information from all parts of the globe as would be helpful to our 
merchants and manufacturers. It should likewise be made a center 
of opportunity open to all to consult consuls, commercial attaches, 
and other officials whenever they return home. Notice of such 
visits could easily be published, and those interested in the export 
trade enabled to obtain at first hand, reliable information regarding 
records and trade conditions in foreign lands, such as they could 
scarcely gain in any other way. Such a museum as I have sug- 
gested would be a splendid work for this League, or else for the 
Chicago Association of Commerce, to undertake. 

Another method often used by foreign governments is that of 
stimulating the establishment in other lands of official chambers of 
commerce. France seems to have been the leader in this move- 
ment. There are more than twenty-five such bodies receiving aid 
from its treasury. The French consul is usually connected with the 
chamber in an official capacity. The semi-official chambers of com- 
merce in her colonies and in foreign countries have not only been 
fruitful sources of information, but are centers of fresh influence 



NATIONAL BUSINESS CONGRESS 71 

and powerful factors in the development of foreign trade. Some- 
times the home chamber of commerce will organize and finance a 
commercial mission to some foreign territory for the purpose of 
establishing close business relations between the two. Thus, the 
chamber at Lyons sent such a commission to Southeastern Asia with 
the result of placing considerable amounts of home capital and 
creating a good demand for home goods. Again, a considerable 
part of the funds of the Paris chamber goes to the maintenance of 
commercial schools and especially the endowment of traveling fel- 
lowships to deserving graduates. These students are expected to 
go abroad and make a study of commercial conditions, reporting 
upon the same when they return. 

The League Bill and the Lowden Bill: You are aware that 
the first act passed by Congress grading and classifying the consular 
service, was in April, 1906. Payment by fees was abolished in this 
reform act and straight salaries ranging from $2,000 to $12,000 a 
year were provided. This measure marked a great step forward, 
but unfortunately the vital part, providing for the merit system in 
the appointments and promotions, was stricken out of the bill as 
enacted. President Roosevelt, by executive proclamation of June 
27, 1906, immediately supplied the deficiency by providing for ap- 
pointment to the lower grades of the service upon examination, and 
for promotion to the higher grades solely upon records of demon- 
strated efficiency. 

President Taft, by executive proclamation of November 26, 
1909, confirmed and continued the good work of his predecessor. 
The merit system, however, is still provided only by executive proc- 
lamation and, therefore, liable to be weakened or entirely disre- 
garded by any successive administration. It is highly important, 
therefore, that we should go on and secure what has been given us 
by executive proclamation in the form of a duly enacted legislation. 
The public interests throughout the country are practically unani- 
mous in this demand and no one can doubt that public opinion will 
in time force its adoption. But we should get this law at this 
coming session and not have it delayed any longer. 

Now there will again be at least two bills presented at this ses- 
sion of Congress : the Lowden bill, and the bill drawn up and 
backed by this League. They are both alike in that they provide 
for grading and classifying the service, for holding examinations 
and for efficiency records, but they differ vitally in that in the Low- 



72 NATIONAL BUSINESS CONGRESS 

den bill the Secretary of State is required only to report the names 
of those who pass the examinations, and also those worthy of pro- 
motion, to the President, who may or may not make his appoint- 
ments and promotions from that list ; while the League bill provides 
for entrance into the service solely on the basis of ability and ef- 
ficiency, as shown in the examinations, to which candidates have 
been especially designated by the President, and likewise for pro- 
motion only after approval by the examining board, which shall be 
advised by the chief of the consular bureau in regard to the ef- 
ficiency records of the candidates for promotion. 

The Lowden bill thus has the great objection of leaving the 
President open to political pressure. Indeed, the very machinery 
of examinations and records could be used, if a President should 
so desire, as a cloak behind which to conceal his partisan and politi- 
cal appointments. 

Now, the objection raised by Mr. Lowden and the Committee 
on Foreign Affairs of the House to the mandatory provisions con- 
tained in the League bill, is that it is unconstitutional in that it 
seeks to limit the powers of the President to appoint consuls, sub- 
ject only to the advice and consent of the senate. This is un- 
doubtedly a serious point and one which is not at all clear. It has 
been stated, however, that a distinguished constitutional lawyer has 
declared that there is no valid ground for the contention that to 
oblige the President to' designate for examination and then to 
appoint from the list of successful candidates limits his prerogative 
of appointment. And this would seem to be borne out by the fact 
that both President Roosevelt and President Taft have earnestly 
recommended that such provisions be enacted into the law. If, how- 
ever, the Foreign Committee becomes convinced that such grave 
constitutional objections to the measure are insurmountable, it would 
be entirely feasible for both houses of Congress to pass a resolution 
declaratory of the way in which access to the service can be gained 
and the service in general conducted. No President would want or 
would dare to act contrary to the will of the people thus ex- 
pressed. 

There is no doubt that the business interests of the country are 
becoming thoroughly alive to the necessity of having an efficient, 
non-political consular service. They have sustained and encour- 
aged every effort which has been made to put the service upon „ 
purely business basis. The press has been generous in its treat- 



NATIONAL BUSINESS CONGRESS 73 

ment of the proposed legislation, and it seems entirely improbable 
that we shall ever again go back to the spoils system, but rather 
that the present status, secured by executive proclamation, will be 
enacted into law. A trained and efficient foreign service, effectively 
administered at Washington and actively supported by our com- 
mercial interests, and backed up by an aggressive public opinion, is 
of inestimable value to the growth and prosperity of our foreign 
trade. (Applause.) 

The Chairman: Is there any discussion of this subject, 
Gentlemen ? 

If not, we will stand adjourned until 10:30 o'clock tomorrow 
morning. 

Whereupon an adjournment was taken until December 12, 
1911, at the hour of 10:30 o'clock a. m. 



74 NATIONAL BUSINESS CONGRESS 



THIRD SESSION. 



Tuesday, December 12, 1911. 
10:30 o'clock A. M. 

The meeting was called to order by Chairman Sheldon. 

The Chairman : Gentlemen, after our successful day of yes- 
terday, we are looking forward today to accomplish much more. 
Is there any business to come before the meeting? 

Mr. Frost : Gentlemen, if we are to accomplish anything by 
these meetings, if we are to get something done, we must get back 
of this action, and in order to do that it is necessary to see that the 
program that we formulate be sane and safe. This can only be 
accomplished by those things we hold in common; and, therefore, 
it is necessary that the resolutions that the committee formulate 
should be gone over by the different members. And it is necessary 
that we begin our labors as early as possible, in order that the last 
day some legislative program may be submitted that will meet with 
your approval, and back of all of which we can stand and push it 
to a successful culmination in the Congress; and, therefore, Mr. 
Chairman, I offer a resolution that the Chair appoint a committee 
of five on resolutions, with authority to draft and to submit to this 
body, for its approval, a program of action to be taken by the body. 

Motion duly seconded. 

The Chairman : You have heard the motion. All in favor 
say Aye. Contrary, No. 

Motion carried. 

The Chairman : The Chair will name as Committee on 
Resolutions: Mr. A. P. Nfevin, of New York, Attorney for the 
National Association of Manufacturers ; Mr. W. H. Stackhouse, of 
the French & Hecht Wheel Manufacturing Company, Springfield, 
Ohio; Mr. Otto H. Faulk, iron founder, Milwaukee, Wisconsin; 
Mr. Charles B. Boothe, merchant, Los Angeles, California; Mr. E. 
Allen Frost, Chairman, General Counsel of the National Business 
League of America. 

You have heard the list of names forlhe Committee on Reso- 
lutions. On motion approved. 



NATIONAL BUSINESS CONGRESS 75 

Gentlemen of the Congress : We will now listen to an address 
by Mr. John Kirby, Jr., President of the National Association of 
Manufacturers, on "THE RELATION OF INDUSTRIAL 
ABUSES TO OUR FOREIGN AND DOMESTIC TRADE." 

(Applause.) 

Mr. John Kirby, Jr. : Mr. Chairman and Gentlemen: I would 
not dare trust myself to talk to* a body of men such as are as- 
sembled here without putting what I have to say in writing, and 
while you have my sympathies in having to listen to what I have 
written, I hope when I get through it will make some impression 
upon your minds, and that you will not, some of you at least, say, 
as many have said, "he is rabid and a radical and talks too plain." 
I am going to talk plainly, and I think, in view of the recent devel- 
opments and the newspaper editorials that have appeared in the 
country during the last ten days, that I certainly cannot outdo some 
of the newspaper editors in radicalism. 

This gathering of business men, representing practically every 
department of trade and commerce, has assembled in this great com- 
mercial and industrial center from all parts of the United States, 
for a purpose. 

Now, what is that purpose? Is it merely for an interchange 
of views with respect to ways and means by which we may extend 
our trade with foreign countries? I think not. True, that is one 
of the subjects of our meeting here, but there are men in attend- 
ance who would not be here if that were the only subject they ex- 
pected would be discussed at this congress. 

The fact of the matter is, things are in an abnormal condition 
in this country. Political and social chaos prevails in this land. 

We seem to be troubled with economic convulsions for which 
every man appears to be hunting a remedy and an avenue of 
escape. 

On the one hand is the government making the lives of the 
managers of our great corporations miserable from fear that they 
will be dressed up in clothes that are distasteful to them, while, on 
the other hand, is the multitude insisting that many men who 
have been successful in business shall be compelled to don the livery 
of the "pen." 



76 NATIONAL BUSINESS CONGRESS 

A PANACEA FOR ILLS. 

We seem to have gotten tired of the institutions which have 
made possible the great prosperity this nation has enjoyed. Many 
people seem to have become imbued with the idea that these institu- 
tions are back numbers, and that, because they afford opportunity 
for the poor man of today to become the well-to-do or the rich man 
of tomorrow, they should be discarded for something very much 
older, but disguised as new; and that something, they know not 
what, should take the place of these tried and successful institu- 
tions, in the hope that a panacea for the ills of society may, per- 
chance, be found. 

Some people have an idea in their minds that to make a rich 
man poor is the way to make a poor man rich, and their whole line 
of action is in that direction. They covet riches, but they are mis- 
guided in their notions about how to acquire them, and they go 
about strewing the road to success with thorns and thistles, and bar- 
ricading the avenues which lead to opportunity and wealth. Such 
people have always existed and they will always exist; but, just at 
this time, they seem to have taken on a new lease of life and in- 
haled an unusually large gust of discontent. Some of them are 
more or less sincere in their theories about how society should be 
organized and regulated in order to provide a more equal distribu- 
tion of wealth, but many of them are manifestly demagogues who 
prey upon ignorance and "who favor anything to get coon." They 
would destroy confidence, yes they have destroyed it. They would 
turn the nation upside down or reverse its progress and develop- 
ment in an effort to promote their own greedy and selfish interests. 
They march up and down the land inflaming the masses against our 
established institutions, and preaching Socialism under the guise 
of progressivism, just because they think it is popular, and will 
help them to reach their goal. 

The muckrakers, the yellow journals, the so-called uplift 
magazines, have filled the minds of the people with the most fal- 
lacious and Socialistic ideas about the great harm "the interests," 
the great business activities upon which labor is dependent for em- 
ployment, and trade and commerce for activity, are doing the com- 
mon people, whereas, as a matter of fact, the people would be much 
more "common" than they are now were it not for these "interests" 
and the captains of industry who direct their management; indeed, 
they would soon find the level of the Mexican peon. 



NATIONAL BUSINESS CONGRESS 77 

The present ills of society are more imaginary than real, and 
are not the result of any real cause. They have their existence 
largely in the imagination of the agitator and the "space-writer," 
who live and thrive by sowing the seeds of discontent, envy, malice 
and Socialism. 

This muckraking and efforts of agitators to overthrow existing 
conditions are not of recent origin ; indeed, they have existed since 
the beginning of recorded time ; always ready and anxious to de- 
stroy the beneficent work of others, obstruct the onward march of 
progress, and develop chaos. 

To illustrate the fact that the existence of these evil conditions 
and the enemies of the peace and welfare of society who develop 
them are not of recent origin, I will quote from a speech delivered 
in the United States Senate more than seventy-eight years ago, by 
Daniel Webster, in which that illustrious Senator said : 

"There are persons who constantly clamor. They com- 
plain of oppression, speculation and the pernicious influence of 
accumulated wealth. 

"They cry out loudly against all banks and corporations, 
and all the means by which small capitals become united, in 
order to produce important and beneficial results. They carry 
on a mad hostility against all established institutions. They 
would choke up the fountains of industry, and dry all its 
streams. 

"In a country of unbounded liberty they clamor against 
oppression. In a country of perfect equality, they would move 
heaven and earth against privilege and monopoly. In a coun- 
try where property is more equally divided than anywhere else, 
they rend the air with the shouting of agrarian doctrines. In 
a country where the wages of labor are high beyond all paral- 
lel they would teach the laborer that he is but an oppressed 
slave. Sir, what can such men want? What do they mean? 
They can want nothing, sir, but to enjoy the fruits of other 
men's labors. They can mean nothing but disturbance and dis- 
order, the diffusion of corrupt principles, and the destruction 
of the moral sentiments and moral habits of society. A licen- 
tiousness of dealing and of action is sometimes produced by 
prosperity itself. Men cannot always resist the temptations 
to which they are exposed by the very abundance of bounties 
of Providence and the very happiness of their own condition." 



78 NATIONAL BUSINESS CONGRESS 

ARE WE HEWING TO HAPHAZARD LINES? 

As fitting as these words were to the conditions of the times 
in which they were uttered, they are no less appropriate to the con- 
ditions existing today. 

Many people who have not shared in the prosperity of the 
country to the full extent which they think they should have done, 
attribute the failure to realize their hopes and expectations to what 
they choose to call "the system." That is to say, the basis upon 
which society and business are organized. They never stop to ask 
whether the real cause is not inherent in themselves, or whether, if 
society were organized along the lines of their own ideas they 
would be better or worse off than they are. Such people are always 
ready listeners to the oily tongue of the theorist and the demagogue 
and receptive of their specious arguments. They are experts at 
destruction, but for construction they rely on the men and the sys- 
tem they so bitterly condemn. 

Our forefathers marked a line, and as long as we hewed to it 
the nation progressed, but we seem to have lost that line and are 
now hewing to haphazard and broken lines. 

What the result will be if we keep on in that way we can only 
predict. But it is most likely to be chaotic and disastrous. 

FOREIGN AND DOMESTIC TRADE. 

Coming now, more specifically, to the subject assigned to me: 
"The Relation of Industrial Abuses to Our Foreign and Domestic 
Trade," I wish to direct your attention to some points of interest 
in connection with our standing in foreign markets. 

We have arrived at a wonderful period in our industrial de- 
velopment. A period where many problems confront us that are 
pressing for solution to a greater degree perhaps than ever before, 
and some of these problems are comparatively new. Among them 
is the manner and extent to which men and capital may combine or 
unite for the development of industry and the conservation of 
energy, the securing of adequate monetary returns and at the same 
time meet the just requirements of the laws of the land, as express- 
ing the interests of the whole body of the people. 

Another problem is the relations of the employer and the em- 
ployed, and the methods by which they can work in harmony and 
further their mutual interests. 



NATIONAL BUSINESS CONGRESS 79 

A third is the problem of wider markets for the products of 
our mills and factories as well as our farm products. 

At this time many great industries not only have the capacity 
to supply all the present and immediately prospective requirements 
of the United States, but have a surplus capacity adequate to meet 
the need of a much larger population. 

To utilize the surplus capacity, therefore, we need to exploit 
the markets of foreign lands. 

This is a trite topic in many respects, for the desirability of 
securing foreign markets has been preached to, and urged upon, the 
business men of this country by diplomats, statesmen, consuls and 
editors of trade papers for many years. According to some of the 
most ardent advocates of export trade, the American manufacturer 
has been derelict in his duties in that respect. To accept this as a 
truth would be to accept a greatly exaggerated statement. What- 
ever may be the shortcomings of the individual manufacturers, 
taking the manufacturing class as a body, they have done as well in 
exploiting foreign markets as their rivals of other countries, under 
the conditions which have surrounded and do surround the indus- 
tries of this country. 

It is not the business of the manufacturer to cultivate export 
trade merely for the sake of saying that he is an exporter. It is 
his business to so utilize his resources and capacity as will bring 
the most beneficial and lasting results to himself, his associates and 
his employes, whether the market be local, country-wide or world- 
wide. 

To say that this country, or that country, leads the United 
States in the exports of this or that article or commodity, means but 
little ; it does not necessarily mean that that country is more pros- 
perous, or the exporting manufacturer more successful, or the vol- 
ume of business larger than that of the manufacturer of like com- 
modities in this country, who may not have sought foreign fields. 

Too little thought is given by the critic of the American manu- 
facturer to the enormous extent of our home market, and to the 
rapidity with which it grows over a period of years. 

Nevertheless it is wise forethought in manufacturing and mer- 
chandising to cultivate as broad a field as is practicable, in order to 
be prepared for local or transitory changes, which at one time or 
another will be affecting the particular or local markets of every 
industry. 



80 NATIONAL BUSINESS CONGRESS 

Therefore, personally, and as representing the great Association 
of which I have the honor to be President, I am heartily in favor of 
encouraging the serious efforts made by our manufacturers in seek- 
ing the trade of other lands. In fact, the National Association of 
Manufacturers, when organized sixteen years ago, made special 
efforts to provide the manufacturers of that day with the informa- 
tion and personal service which would enable them to intelligently 
look into the possibilities of the foreign field, and that work has 
always been maintained as an important branch of the activities of 
the Association. 

If we glance at the records of our export trade at the time that 
Association was formed and compare them with the records of the 
present day, we shall see that we have made great advances as an 
exporting nation in manufactured products, and that advance has 
been due to the manufacturers themselves in the individual efforts, 
and in their co-operation through such bodies as the National As- 
sociation of Manufacturers, in providing ways and means for the 
use of intelligent effort in the export field. 

To specify, let me give you some comparisons of the exports 
of some of our manufactured articles. For instance: in agricul- 
tural implements, our exports from the period mentioned, 1895, to 
the present time, have increased about seven-fold; our exports of 
cars, carriages and vehicles generally are thirteen times greater; 
those of drugs and chemicals have trebled; while in the exports of 
manufactured copper there has been a more than seven-fold in- 
crease, showing that we are well living up to our advantages in this 
respect as the great copper producing country. 

In the textile lines, where individual skill of the operative is so 
great a factor, it is encouraging to note that our exports of manu- 
factured cotton have trebled in this period. In the manufactures 
of rubber, the raw material for which we must seek from another 
land, the increase has been eight-fold; in scientific instruments, 
where not only individual skill, but a high order of intelligence is 
necessary for their manufacture, the increase has been more than 
six-fold; in the great industry, where skill, intelligence and capital 
are so largely required and which goes so far to promote the com- 
forts of mankind, viz. : manufactures of leather, the increase has 
been far more than three-fold. In another article which promotes 
the health of mankind through cleanliness, viz. : soap, our exports 
have more than trebled in this period, while in the great wood- 



NATIONAL BUSINESS CONGRESS 81 

working industries, where it is quite natural that we should be 
looked upon as prominent, our exports have advanced nearly four- 
fold. 

In the great iron and steel industries, the ones in which in many 
lines there has been the keenest competition with foreign nations, 
the combination of American capital, highly trained labor, intelli- 
gent utilization of resources and systematic cultivation of foreign 
markets has resulted in a seven-fold increase in the value of our 
iron and steel exports in 1911, as compared with 1895. 

Now, these figures are merely multiples of comparatively small 
quantities in the earlier year, but in all the instances cited, the ex- 
port values amount to many millions of dollars, making a grand 
total in 1911, of over $900,000,000 for the exports of manufactured 
and partly manufactured goods of this country, or nearly half of 
our total exports. 

I have referred to these increases in our exports as a proof 
that the American manufacturer has by no means been asleep in 
finding a market in foreign countries for his goods. 

If you will compare these figures with the increases in the 
export of like articles from rival manufacturing nations, you will 
find them by no means discreditable to the efforts of our manu- 
facturers in securing foreign markets. 

But our enterprise in meeting home requirements, and provid- 
ing in many cases increased capacity in advance of these require- 
ments, makes it practicable and desirable to seek still more strenu- 
ously for foreign outlets for our manufactured goods. 

We have many suggestions offered and measures advocated for 
aiding in this work. Some go so far as to say that we cannot 
greatly increase our trade unless we have our own Merchant Ma- 
rine, American banks abroad, reciprocity treaties with foreign 
countries, and more effective consular service, etc. 

Our manufacturers as a body, and particularly the National 
Association of Manufacturers, are always ready to lend their influ- 
ence to promote these and other measures that will be for the best 
interests of our industries and the country in general. 

But we, as manufacturers,, realize that whatever aid may be 
given us through government or other outside sources, it remains 
with us individually to secure the orders which may be available for 
the manufactured goods of the United States — that is we must go 



82 NATIONAL BUSINESS CONGRESS 

after the business ourselves, or seek it through our own direct rep- 
resentatives or agents. 

There are few instances in which the lack of American owned 
or controlled transportation or banking facilities prevent our manu- 
facturers from competing on practically even terms with those of 
rival nations, but wherever we can improve those facilities to our 
own advantage, we should lend our influence to bring about that 
improvement. 

There is one influence which is as potent, if not more so, than 
any above referred to, for affording opportunities and encouraging 
the use of American products in foreign lands. I refer to the in- 
vestment of American capital in foreign countries. 

Our own capital requirements, until comparatively recently, 
have been so great as not only to remuneratively absorb the avail- 
able money of this country, but have also caused us to draw largely 
on the capital of the older nations of the world. Now, however, 
American capital is seeking investment in Canada, Mexico and 
South America. We all know the excellent results of our large in- 
vestments in Canada. We also have a pretty fair idea of the re- 
turns to this country of the $750,000,000 invested in Mexico. 

It is now estimated that there is $150,000,000 in Cuba; $50,- 
000,000 in Brazil; $40,000,000 in Argentina; $35,000,000 in Peru; 
and $40,000,000 in Central America. 

A glance at the increase of our exports to these lands will show 
that these investments have had their influence in increasing the use 
of our manufactured products therein. 

The market for British goods in Latin-America has been 
largely created, and to a great extent maintained, by the invest- 
ment of British capital in the railroads and other enterprises of that 
region. 

In recent years, important concessions for railroads have been 
granted to Americans in Brazil and Uruguay, and the result is that 
as these railroads have been started and built there have been op- 
portunities (which opportunities have been taken advantage of), 
for the equipment of those roads with American locomotives, cars 
and numerous other articles necessary for railroad purposes. 

But it is not in Latin-America alone that the American manu- 
facturer has opportunities for a lucrative market, great as these op- 
portunities are and rapidly as they will grow. 



NATIONAL BUSINESS CONGRESS 83 

There are other lands which are developing, some of which a 
few years ago were looked upon as almost valueless for many 
classes of manufactured goods. I refer particularly to China. 

When the political troubles now rife in China are settled, as we 
trust they will be in the best interests of the people, and maintain- 
ing the territorial integrity of the country — there will be seen there, 
in a comparatively short time, industrial development which those 
fairly familiar with China a few years ago would scarcely have 
believed possible. 

But progress is in the air in all regions of the earth. The 
oriental nations are becoming imbued with the Eastern spirit of 
enterprise, and to some extent, its materialism. This also means in 
nearly all countries the development of manufacturing industries 
within their borders. But this need not alarm us as a nation if we 
can secure fair treatment as against competitors in the markets of 
those countries. 

The gradual development of manufacturing industries in other 
lands tends to provide a market for a wider range of manufactured 
articles necessary to the growth and continuance of these industries, 
and at the same time educate the people of those countries to an 
appreciation of a higher and better quality of goods, which will 
always be demanded and supplied by nations having the intelligence 
and enterprise which will enable them to keep in advance of rivals 
in industrial achievement. 



RESPONSIBILITY OF INDUSTRIAL ABUSES. 

Speaking more specifically of the relation of industrial abuses 
to our foreign and domestic trade, there are, of course, numerous 
forms of industrial, as well as commercial abuses, which might be 
dealt with in lengthy detail, but I shall call your attention only to 
those which more seriously affect the cost of our wares, and whose 
tendencies are to produce results detrimental to our interests as a 
nation in trade competition with other countries. 

A great hue and cry extends from one end of this land to the 
other, and the country is rife with protests against and in denuncia- 
tion of so-called business trusts. Practically every industrial aggre- 
gation is dubbed a trust. There appears to be little, if any, dis- 
crimination made between them. Every large corporation and 



84 NATIONAL BUSINESS CONGRESS 

every successful man is paraded as a trust unit, and all are made 
the target for muckrakers, charlatan politicians and disgruntled 
cranks. 

BRAINS AND CAPITAL. 

It is to the combination of brains and capital more than all 
else that this country owes its wonderful and rapid development, 
and to the vast opportunities for labor and capital that have been 
recently opened up as never before in its history. But because 
some men seize these opportunities, while others do not see them, 
or, if they do, fail to grasp them, they are heralded as enemies of 
the common people, and, because of the seeming popularity, legis- 
lative restrictions are thrown around about their thrifty and enter- 
prising tendencies. 

BENEFIT OF LARGE CORPORATIONS. 

However great may be the fault found with some large corpo- 
rations, the operations of many of them seem to have been bene- 
ficial, rather than otherwise, to the common good. 

Do not misunderstand me ! I am not defending combinations 
or individuals who intrude upon the rights of others, nor those who 
carry on their operations in violation of the laws of the land, or in 
restraint of trade and commerce. That is not the purpose of my 
reference to this subject. It would, indeed, be a dangerous thing 
for this country to ignore or permit the unrestricted power of great 
corporations or combinations, whether of capital or labor, in the 
monopoly of commerce and industry, or in the monopoly of the 
labor market, and proper restrictive legislation should and must 
protect the citizens against the use and opportunity to use such 
power, but the difficulty lies in drawing the line. 

THE SHERMAN ACT. 

Let us reason together for a moment. The Sherman law was 
enacted in 1900, just at the beginning of the so-called trust era 
in this country. Many of the large corporations now being prose- 
cuted, or which have been prosecuted under its provisions, have 
formed since that time, and in accordance with the advice of the 
best legal talent obtainable. 

Now, it seems that the literal enforcement of that law operates 
to destroy a business policy which has proven to be the mainspring 



NATIONAL BUSINESS CONGRESS 85 

of our national greatness, for, during the era of large business cor- 
porations and combinations, this country has advanced and our 
foreign trade increased to proportions never before dreamed of. 

As a single illustration of the far-reaching advantages to be 
realized from these great enterprises, I will refer to a personal in- 
stance. In 1881, I had occasion to go to my grocer and procure a 
gallon of kerosene oil for which I paid 40 cents. I can now buy 
the same quantity of a much better grade of kerosene oil for 10 or 
12 cents, and I am wondering how long the latter price will prevail 
under the dissolution plan reverting the Standard Oil Company into 
its original 34 separate parts. 

But it is not my purpose to discuss the Sherman law, nor the 
prosecutions which are being enforced under it. There are other 
speakers here to whom that subject has been assigned. But, as 
bearing upon my own subject, it is fitting that I should refer to it 
and to say that the real abuses, possible if not probable, to which 
monopoly in trade may lead should be guarded against by proper 
legislation, lest those abuses prove a barrier to both foreign and 
domestic trade. 

We should remember that it was ruthless competitive methods 
that forced business combinations into existence, and if my experi- 
ence teaches me anything, it is that a return to those methods will 
retard our development and lessen our export trade, for it is now 
an established fact that large aggregations in industry can produce 
more cheaply than can segregated units in the same kind of manu- 
facture, hence they are in better position to extend the export trade 
of the country. 

A few years ago, a strenuous effort was made to have the 
Sherman law amended, and the proposition was (as many manu- 
facturers view it) to "jump out of the frying pan into the fire." 
The "distinguished" Samuel Gompers was selected to preside over 
the convention called to consider the question, and he became the 
leading spirit in the movement. 

His murderous, monopolistic labor machine was to be ex- 
empted from the criminal provisions of the law and was to be given 
carte blanche in the use of the boycott and other destructive agen- 
cies, declared by the Supreme Court illegal and intolerable, and 
which, with business men, never would be tolerated, Sherman law 
or no Sherman law. The effort failed, as it should, and as it 



86 NATIONAL BUSINESS CONGRESS 

always will when it is proposed to remove any of the restrictions 
now placed upon organized labor's determined policy and methods 
to either control or ruin the commerce and industries of this coun- 
try. 

I believe that if a few sane, level-headed business men would 
take the matter seriously in hand with the avowed purpose of 
separating the wheat from the chaff, they could prepare, either an 
amendment to the present law, or an entirely new law, which, while 
prohibiting harmful trusts, would foster the advantages to be ob- 
tained through business combinations that recognize the doctrine 
of "live and let live," and do it in such concise and comprehensive 
manner that any man could tell when he is or is not violating the 
law, and which would warrant and receive the solid backing of all 
fair-minded men. 

I believe, too, that such a measure, which might also embody 
a reasonable provision for governmental supervision over the capi- 
talization and stock and bond issues of aggregations of corporations 
under one head, would be enacted into law by an intelligent and 
honest Congress. But any proposed tinkering with the Sherman 
law which would open the way for free and unrestricted use of 
unfair or coercive methods in dealing with competitors in business, 
or provide for the removal of any barriers to the baneful methods 
of organized labor, will meet with sufficient opposition to kill it. We 
are living in an age of organization; an age when but little can be 
accomplished except through organization; an age when we must 
cope with organization; an age when organization alone can pre- 
serve your industrial freedom and mine. 

And the sooner all business men, including farming interests, 
learn the lesson that the preservation of their industrial and com- 
mercial rights are dependent upon organization, the sooner will 
those rights, which are now hanging in the balance, be assured. 

But all abuses incident to the power of organization should 
and must be guarded by the strong arm of the law. 

Furthermore, the present vigorous attacks upon business cor- 
porations and business men, while the federal government refuses, 
point blank, to prosecute the labor trust, is, in my opinion, a dis- 
grace to our political system, and a blot upon American jurispru- 
dence. 



NATIONAL BUSINESS CONGRESS 87 

THE THORN IN OUR FLESH. 

I now wish to call your attention to a form of organization, the 
abuses of which so far exceed all other industrial abuses as to 
make them appear infinitesimal and of little consequence in com- 
parison. I refer to the American Federation of Labor, and its con- 
stituent unions. The purpose of this outfit is to have the workers 
control the employers' business in matters pertaining to the man- 
agement of employes ; to dictate who may or may not be employed. 
The conditions under which labor shall be employed; the amount 
of work a man shall perform for the wages he receives; the num- 
ber of hours he may work, or pretend to work; the number of our 
American boys that shall be permitted to learn trades and thus be- 
come useful and industrious citizens, and the number that shall be 
turned adrift to become vagabonds or tramps, or whatever fate may 
have in store for them; to constitute itself a trust for the absolute 
monopoly of the labor market, whereby it may grant or withhold, 
at its pleasure, privileges, the power to grant which rests alone in 
the state and nation. It does not, however, propose to assume the 
responsibility of providing for the payroll, nor for the furnishing of 
brains or the genius requisite for conducting a successful business. 
These matters it very graciously proposes to leave to the owners of 
the business. 



A TERRIBLE RECORD, 

The record of this organization and the acts and utterances of 
its officers, leave not the shadow of a doubt that its policy is to em- 
ploy any means, no matter how brutal, unlawful or unreasonable, 
that will tend to promote an industrial condition in this country 
in which the employing classes shall be absolutely at the mercy and 
dictation of the gigantic and merciless labor trust, which, as I have 
said on other occasions, proposes to say to the farmer that he shall 
either harvest his crops under its rules, or permit them to perish; 
to the manufacturer, that he shall neither produce nor transport 
contrary to its will; to the merchant, that he shall neither buy nor 
sell, unless his wares bear the brand of its approval ; to the laborer, 
that he must wear its yoke or starve ; and to those who belong to 
none of these classes, that they must suffer the wrongs, submit to 
the losses and pay the penalties to which its rules subject them. 



88 NATIONAL BUSINESS CONGRESS 

A FAIR EXAMPLE. 

It is needless for me to take up your time in discussing the 
relation of the abuses of such an organization to our foreign and 
domestic trade ; the effect is apparent on its face ; but I will cite one 
instance of the result of the domination of this octopus which will 
suffice for all. 

"The Review says that in 1904, San Francisco had 4,500 fac- 
tories with $239,000,000.00 of capital invested in industrial estab- 
lishments, and 44,875 employes. In 1910, she had 1,398 factories, 
with $79,000,000.00 of capital invested, and 14,000 employes, a loss 
of more than two-thirds of her industrial strength." 

In comparison with this extraordinary result, look at the won- 
derful growth of Los Angeles in population and in industrial pur- 
suits during the same period, and then, if you please, give due credit 
to General Otis, the one man above all others, who stood like a rock, 
and fought like the hero he is, for freedom in industry, and to 
whom this country owes a debt of gratitude it can never repay. 

A SOLEMN WARNING. 

To the citizens of this country, especially to politicians ; the Na- 
tional Civic Federation; the General Assembly of the Presbyterian 
Church, which is responsible for the words and acts of Rev. Charles 
Stelzle, and officials of churches and educational institutions, I say 
to you all, and I say it knowingly and with deliberation: 

Be not longer deceived by shams and cunningly devised hypo- 
critical statements, for the institution of which I am speaking has 
proven itself to be a cold, merciless and murderous organization, 
having not the slightest regard for the flag of our country, which 
Gompers trampled upon at San Francisco recently, while haranguing 
a crowd of his followers, nor caring in the slightest degree about the 
brotherly love and uplift of humanity that its officials talk so much 
about. 

David M. Parry told you this in 1903, at New Orleans, and I 
am repeating it now. Gompers told you the same thing when he 
said, "Go to hell with your injunctions." 

It is to be hoped that the McNamara confession, and the facts 
which will be developed by the Department of Justice through Fed- 
eral grand juries, will not only result in the arrest and punishment 
of organized labor leaders, organized bands of murderers, but that 



NATIONAL BUSINESS CONGRESS 89 

it will influence you and every patriot and Christian to such a deter- 
mined opposition and relentless condemnation of existing evils, that 
law-defying unionism, socialism and anarchy, will meet with such 
signal and overwhelming defeat as to establish the fact that "This 
government of the people, by the people and for the people shall 
not perish from the earth." 

THEY NOW SHOUT, "HANG THEM." 

For once, yes, and for the first time in the history of the ac- 
cursed thing, we hear them shouting, as unto Heaven, "Hang them, 
Hang them !" Men who are as guilty as the McNamaras them- 
selves, are shouting the loudest. Why ? Is it because that, as law- 
abiding citizens, they conscientiously feel that justice should have 
its reward? No, no. It is because they have confessed. And 
why did they plead guilty? It was because, first, the noose had 
been drawn tighter and tighter until every avenue of escape, except 
through a bought jury, seemed impossible; and, second, because 
the man who was retained as the one man who could clear them 
whether guilty or innocent, met his match in Prosecutor Fredericks, 
who in several instances, had locked in his own safe bribe money 
which, it is said, passed through that man's hands or was paid by 
his orders ; and not only did the prosecutor have the money, but he 
had the confessions of the parties who received it. How the heart 
of counsel for the defense began to melt in sympathy for the lives 
of their clients as soon as they realized that Mr. Fredericks was on 
to every crooked move that was made, and that the bribe money 
was locked up in the prosecutor's own safe ! Do you wonder why 
they changed their pleas? 

HAVE MY CRITICS CHANGED THEIR MINDS? 

I have repeatedly stated publicly that the type of unionism rep- 
resented by the American Federation of Labor, and advocated by 
Gompers and Mitchell is as great, if not a greater menace to society 
than was the Ku Klux Klan, the Molly McGuires, the Mafias and 
the Black Hand societies, and I have many times been called rabid 
and radical for saying so, by men who ought to have had more 
sense, because I told the naked truth without slobber or whitewash. 
And now every newspaper in the country is saying the same and 
more. I wonder if my critics have changed their minds. 



90 NATIONAL BUSINESS CONGRESS 

"I AM ASTOUNDED!" 

When Gompers, upon being advised of the confessions of the 
McNamaras, said : "I am astounded ! I am astounded I" I believe 
he spoke the truth, but when he said that his "credulity had been 
grossly imposed upon," I believe he lied, and so does everybody 
who possesses an ounce of common sense. v He was astounded at 
the confession of the McNamaras, but not at their guilt. When 
McManigal confessed, Gompers branded him as a fakir, and said 
he was a tool of Burns who, in turn, was the hireling of a great 
capitalistic conspiracy to destroy organized labor; that he knew the 
whole story to be a "f rame-up" and that the McNamara brothers 
were absolutely innocent; that a guiltless man had been kidnapped, 
and much other tommyrot, and he has steadfastly maintained that 
attitude until all of a sudden he was "astounded." 

Now, who for one moment believes that a man of Sam Gom- 
pers' cunning, with McManigal's confession made public, with the 
same and greater opportunity than other people had to know the 
facts, and with full knowledge of the 100 or more cases of dyna- 
mited non-union bridges and other structures, with the repeated 
cases of murder and slugging of non-union men going on con- 
stantly and everywhere in labor disputes, could be so simple-minded 
and so gullible as to feel as positively as he has pretended to have 
felt, that those men were the innocent victims of a conspiracy to 
injure organized labor? Really, is not the proposition so absolutely 
ridiculous as to make the man "look like thirty cents?" 



THE "SAINTLY MITCHELL." 

Now, men, there is no sense in trifling with this question any 
longer. It has been nursed and coddled too long, and we know 
the result. 

The "Saintly" John Mitchell has just finished the publication 
of a series of twelve weekly articles on the various phases of trades 
unionism of the kind v for which he stands sponsor. I doubt if very 
many people have read them, but I have read them to see what he 
would say about the thousands upon thousands of cases of murder, 
slugging, intimidation, coercion and violence perpetrated by mem- 
bers of his pet organization, under the sanction and direction of 



NATIONAL BUSINESS CONGRESS 91 

its officers, and for which many of them have been fined or sent to 
prison. I have looked for some reference to some case where he 
and Gompers had voiced their protest against such practices, and 
where they had inaugurated some move to put an end to them. I 
have looked for some reference to the damnable conspiracy that 
was on trial at Los Angeles. But, if anything of the kind worthy 
of mention, which is not couched in smooth and oily apologetic lan- 
guage, is to be found in any of those articles, it has escaped my 
notice. They are made up of platitudes, sophistry and sop, cun- 
ningly designed to hoodwink the unwary reader, just as all of his 
utterances have been studiously calculated to deceive and mislead. 
The last of these articles was published Sunday, December 10th, ten 
days after the McNamaras pleaded guilty, and yet John Mitchell 
ignored the incident and said not a single word in condemnation of 
the crimes committed in the name of the organization he attempts 
to defend. Practically the whole of his twelfth article is devoted 
to deriding my utterances against the abuses of organized labor. 

The little incident at Los Angeles was apparently not of suffi- 
cient importance to receive recognition at his hand at the price per 
line he was paid for writing it. I will not take up your time nor 
waste mine in further answering John Mitchell. The McNamara 
brothers have justified fully every criticism I have ever made of 
John Mitchell and his organization. Permit me, however, to quote 
one paragraph from a remarkable editorial which appeared in the 
New York Sun, December 6, 1911, and which every man in this 
country should read. The editorial refers to the conspicuous moral 
heroism of a few men as follows : 

"Loewe, who defied the whole Federation and stated that he 
would go back to the bench as a journeyman hat maker before he 
closed his shop to any non-union worker ; Van Cleave, who saw the 
great business which his industrial enterprise had built up slowly 
disintegrating, and yet fought on until death — possibly hastened by 
acute anxiety — ended his trouble; Davenport, a type of the best 
lawyer who developed the testimony upon which the victories for 
law in the Danbury hatters' case and the Buck stove case were 
largely won; Burns, who taking his life in his hands, as did Mc- 
Parlan in the days of the Molly McGuires, never ceased his investi- 
gation until he had woven the net about the dynamiters so strongly 
that no cunning could break through it." 



92 NATIONAL BUSINESS CONGRESS 

THE FIRST PROTEST. 

Not until the McNamaras confessed and laid bare to the world 
the horrible truth, was there ever a protest uttered against such 
things by the militant labor unions or their officers. But when that 
terrible shock came there went up a loud cry against violence and a 
demand that the McNamaras be hanged. Of course, this was done 
as a last hope to save the life of the organization in whose behalf 
the McNamaras perpetrated the heinous crimes for which they have 
been sentenced. Let it be remembered that the whole bunch stood 
solidly behind the whole gang of murderers right up to the moment 
of the final and positive exposure. 

"HUSH! DON'T SPEAK SO PLAIN." 

Men, hear me ! I tell you candidly, fearlessly and as seriously 
as I know how, what I have for years been telling the people of 
this country, and what many well-meaning men have censured me 
for telling in plain language, and that is that every law-abiding, 
self-respecting, thinking man in this country, whatever he may be, 
a day laborer or a bank president, or whatever be his calling, should 
turn his face like adamant against any organized system that makes 
possible a condition such as has been exposed at Los Angeles. 

There is no use to mince matters nor to blind your eyes to a 
thing that stands out as bold as the shining sun. Now, is there any 
sense in permitting such men as John Mitchell to throw sand in 
your eyes? I have no patience with men who say, "Hush! Don't 
speak so plain." It is that sort of mollycoddle nonsense that has 
helped to advance the curse to where it is, and I say to you that it 
is the plain bounden duty of every decent citizen to help wipe the 
thing from the face of the earth. The coward who shirks that 
duty is but little if any more worthy of the respect of his fellow- 
citizens than are the men who constitute a part of the conspiracy 
itself. 

If labor cannot organize and behave with decency and justice, 
then, in God's name, I say it has no business to be organized, and 
the rest of the people should see to it that it is not. In speaking of 
business interests, it has been altogether too common to omit the 
farming interests, and it is time now to include them. 

The farmer is as much a business man as the manufacturer or 
merchant, and by recognizing this fact and all working together in 



NATIONAL BUSINESS CONGRESS 93 

a common cause we shall yet be able to save this country from the 
throes of dynamite and coercive unionism and to restore to every 
American workman a free passage to and from his labors. (Con- 
tinued applause.) 

The Chairman : Gentlemen, as the hour for adjournment is 
getting near and there is still another address to be made before this 
session is over, in this debate we will have to limit the speaking to, 
I think, about five minutes for each speaker in order to get through. 
The subject is now open for debate. 

If there is no debate we will hear the address of Mr. Frederick 
Townsend Martin, of New York, on "Compulsory Insurance." 
(Applause.) 



COMPULSORY INSURANCE. 



By Frederick Townsend Martin. 



Mr. Chairman and Gentlemen: 

I thank you with all my heart for this opportunity of address- 
ing you on a subject which seems to me of the greatest importance, 
not only to the business and work-a-day world, but to the entire 
Nation. 

In the name of progress, economy, justice and humanity I stand 
here to urge you to take measures that shall result in legislation for 
Compulsory Insurance. 

PROGRESS. 

During the past century great labor-saving inventions, the ap- 
plication of steam and electricity to machinery have completely 
transformed the industrial world. 

Laws, customs and methods adapted to the old order of things 
have proved entirely unsuited to the new. The immense progress 
made in the arts and sciences have found no counterpart in the laws 
and customs which that progress demanded. 

We often discard machinery that is five or ten years old, for 
something better, but we are content to live under laws and practices 
which have remained almost unchanged for three centuries, and 
which have little to commend them except their antiquity. 



94 NATIONAL BUSINESS CONGRESS 

In the world of mechanics, of manufactures, of physical science 
and of commerce the inventive mind is constantly on the alert to dis- 
cover better, simpler, more economical or more effective methods, 
while the legislator boasts of treading the highways of antiquity, 
as if there were no unexplored regions in the field of social or polit- 
ical science, no discoveries to be made, no reforms to be achieved. 

The premise from which I proceed may be summed up by the 
maxim "Every man is entitled to a living/' 

If a man's life is sacred, if he is not to be stricken down by the 
assassin, so his right to a living shall be guarded. He shall not be 
allowed to starve. The right to life and the right to a living are 
not to be distinguished. 

To quote Ecclesiasticus : "He that taketh away his neighbor's 
living, slayeth him." And "He that defraudeth the laborer of his 
hire, is a blood-shedder." The great Montesquieu maintained that 
the State owes to all of its citizens an assured subsistence and a 
mode of life consistent with health. 

To Carlyle it seemed a platitude of a world in which all work- 
ing horses could be well fed and innumerable workingmen should 
die starved. A civilized nation must, necessarily, act upon the 
principle that no person within its limits shall perish for lack of 
food, clothing or shelter. 

Therefore, it must decide in substance that the product of labor 
of a given generation must support all during that generation; but 
while the industries of a community ought to support the great body 
of workmen, every industry ought to support those workers who 
devote themselves to it. If a given industry does not pay the neces- 
sary living wage; it is not a self-supporting industry. It is in a 
measure parasitic. 

EMPLOYERS. 

If all employers were a unit and if this unit were intelligent, 
however merciless it might be, confronted with the problem of 
procuring labor merely upon hard business principles, keeping in 
mind both cost and efficiency, seeking the lowest cost consistent 
with high efficiency, it would consider how much it would cost to 
rear the human being or the class of human beings best fitted for 
its purpose. It would consider how long a period of infancy must 
precede his capacity to work and what loss from death would occur 
during that period. How long the natural term of labor may be 
and how much diminished by premature death. 



NATIONAL BUSINESS CONGRESS 95 

What allowance must be made for incapacity resulting from 
accidents, from sickness, from invalidity of any sort. How long a 
period of dependence there would be after working days were over. 
It would find that, for the best results, this workingman and his 
family must be well clothed, well housed, well fed, and he must 
live and work under proper hygienic conditions. 

He must have hospitals, medical and surgical attendance in ill- 
ness and after accidents ; it would even find that to a certain extent 
he must be educated and have mental and moral training. Having 
determined this cost, it would pay that and nothing more. In other 
words, it would act as intelligently, not to say humanely, in rearing 
a workman destined for efficient labor, as it now does in rearing a 
beast of burden. 

EMPLOYES. 

On the other hand, labor acting with similar intelligence and 
singleness of purpose and making similar allowances for waste, 
could and should demand nothing less than the cost of living for 
the whole period of life. 

WHAT BOTH EMPLOYER AND EMPLOYE IGNORE. 

It practically happens, as though through some inadvertence, 
that in making a contract of the greatest possible moment, both 
parties seem to ignore absolutely certain very important elements. 

The contract is made as though sickness, accidents, invalidity 
and old age had been permanently banished from the earth. The 
daily wage is sufficient only for daily necessities. A man entitled 
to support for a lifetime unwittingly consents to a wage based upon 
a portion of that lifetime. 

The disparity between the wage paid during the period of 
earning capacity and the wage sufficient for the workman's sup- 
port throughout his life is most striking in dangerous and unhealthy 
employments. 

If the industry, paying what is a living wage for the moment, 
merely exhausts its victim in twenty years or less, as is frequently 
the case, it has drunk the wine of the wage-earner's life and left 
to him, or to society, the dregs. 

It has often wastefully used up this human material and 
thrown the wreck aside as remorselessly as though it were inani- 
mate machinery. 



96 NATIONAL BUSINESS CONGRESS 

This subject has usually been discussed as though it concerned 
individuals or classes, the employer and the workman. That might 
be a safe policy if the parties to a labor contract met on equal 
terms, but we cannot ignore the fact that there is no industrial 
equality between them. 

The rate of wages is such as to bring the scale of living very 
near to what is vaguely termed the point of subsistence. 

IN AMERICA. 

We are apt to think of the laboring classes in this country as 
well fed, well clothed and well housed and not proper objects of 
solicitude. We are incredulous when told that Germany's poorer 
classes, though less favored by circumstances, maintain a higher 
level of well-being and a far higher level of vitality than those of 
either the United States or England. Yes ! It is true that we know 
less about the poverty of our people than almost any other nation 
of the Western world. Americans work themselves out at an 
earlier age and are more subject to fluctuations of employment than 
European workmen and industrial accidents are much more frequent. 

There could undoubtedly be found in many manufacturing 
towns, both in England and America, families who have not once 
caught a glimpse of prosperity in four generations, nor once been 
separated from actual want by an interval of say, thirty days. For 
such workmen, poverty is not mere destitution. There goes with 
it apprehension as to the future. There goes with poverty, too, the 
consciousness of the loss of dignity and manhood; the knowledge 
that there is left no capacity to make the contract for labor on equal 
terms. 

CAUSE OF POVERTY. 

There is a feeling too general that poverty and pauperism are 
the results mainly of intemperance and of improvidence, and we 
sometimes think that we see in them a sort of retributive justice. 
Statistics, both in England and America, indicate most decidedly 
that only a small part of existing pauperism is traceable to intem- 
perance, while most is attributable to misfortune. 

I have in mind the figures compiled by Charles Booth for the 
London Statistical Society ; and Warner, for American Charities. 
It would seem reasonable to expect certain indiscreet consequences 
of a defective wage system. 



NATIONAL BUSINESS CONGRESS 97 

Without going into the matter in detail, it is material to note the 
extent of poverty among workmen in its various forms. Time does 
not permit me to give definite figures; nor is it necessary for our 
purpose, but the investigations, of many competent observers lead to 
the conclusion that more than one-half of the families of the country 
and nine-tenths of those in the cities and industrial communities are 
property-less. 

In a group of states, including Massachusetts, one-fifth are in 
poverty, so says Professor Richard T. Ely, in the North American 
Review. 

PROSPERITY. 

Too frequently the dazzling splendor of great wealth blinds 
our eyes to the real significance of the signs of the times, and we 
think we see evidences of great National prosperity in the very 
phenomena which really indicate Social injustice — a condition 
where the man who toils is invited to bask in the reflected warmth 
and light of another's prosperity. 

PAUPERISM. 

There are property-less living in some degree of comfort, but 
each month's earning supplies but a month's necessities. The vic- 
tims of poverty who constantly feel the bitterness and sting of want 
— paupers clinging like parasites to society. 

Their transition downward is easy. The property-less are on 
the verge of poverty. Those in poverty are on the verge of pauper- 
ism, and from the lowest stage of pauperism there seems to be no 
return. 

A pauper is the victim of poverty who surrenders. The capitu- 
lation is abject, absolute and unconditional. Having acquired the 
hated badge, he is content to wear it for life and bequeath it to his 
children. 

PROBLEM MUST BE SOLVED. 

Society has here a problem of great importance. It must solve 
it with reference to all of its phases — social, economic, industrial 
and ethical. 

We live in a progressive age. The initiation of social experi- 
ments ; the triumphs of social legislation are proclaimed to the whole 
world; these problems are virtually the same, whether under a 
democracy or under a monarchy ; everywhere poverty is squalid and 



98 NATIONAL BUSINESS CONGRESS 

debasing. Everywhere riches are sordid and debasing. Every- 
where the relations of capital and labor are similar, and there 
is a similar social disquietude over real or fancied griev- 
ances; everywhere there is the same gulf between luxury and 
penury ; the same resentment towards the arrogance and pretensions 
of privilege and power. 

THE DEMOCRACY TO BE. 

Nor can we intelligently hope that in some mysterious way 
Democracy will tend automatically to cure industrial evils or to 
solve industrial problems. Rather should we bear in mind that 
from the industrial point of view, Democracy has not yet been 
achieved. 

Men are frequently under the domination of industrial condi- 
tions which inexorably override statutes, Constitutions and Bills of 
Rights. Unless the workman can negotiate on equal terms for his 
labor — the only commodity which he ever has to offer in the world's 
market — unless there is contractual equality, mere political equality 
may be and is a mockery and a delusion. 

His political rights may even be surrendered, as a part of the 
consideration in the contract for labor. But, through sane social 
legislation, based upon principles of equity and equality, we may 
gradually advance towards real Democracy. 

COMPULSORY INSURANCE DEMOCRATIC. 

My claim for Compulsory Insurance is that it is democratic 
because : 

It will secure a greater degree of contractual equality between 
employer and employe than is now possible. 

As to the form which compulsory insurance is to take, that 
must be determined by those more expert than I am in matters of 
legislation, but I care not what form it takes, unless it is compulsory 
upon all, employers and employes, it will be ineffective and un- 
democratic. 

THE AWAKENING. 

The people are beginning to take an interest in this subject. 
A few years ago all suggestions were hushed by the sneering epithets 
"Socialism," "Sentimentalism," "Paternalism," and the hint that 
one was corrupted by German "Absolutism." 



NATIONAL BUSINESS CONGRESS 99 



Of course, there never was any real weight in such empty and 
provincial phrases ; and they merely indicated the fact that the 
American mind was empty of knowledge of a world movement. 

They revealed an indifference to human suffering which did no 
credit to our civilization; and a contempt for social science, not 
honorable to our politicians, editors and lawyers. 

European nations have solved this problem, at least to some 
extent, while America, proud of its inventiveness and initiative, 
lags in the rear and rails at the "Effete" Monarchies of the Old 
World and foretells all sorts of evils like those senile persons who 
praise the times that are dead. 

The time has come for an awakening. Look at the enormous 
cost of litigation, a burden upon the resources of the nation, and a 
disgrace to the legal profession, as well as a source of corruption. 

Studies of the causes of wasteful expenditure in courts reveal 
the slow and serpentine course of personal damage suits, which fill 
the dockets and blockade the roads of Justice. 

Important commercial business must wait while, during long 
years, some mutilated workman, led by an ambulance chasing lawyer 
who is fed on hopes of immense contingent fees, fights his employer 
or a soulless Casualty Insurance Company through court after court, 
in the end to accept the pittance which the attorneys are willing to 
leave him from the award. 

JUSTICE, IDEAL AND REAL. 

The ideal of Justice is prompt, certain, and unbought in- 
demnity. The actual fact is that under our Employers' Liability 
Law the indemnity for injury in occupation is subject to all the 
uncertainties of gambling. 

It comes, if ever, after long and painful waiting, and it is 
robbed of its value by the necessary costs of collection through the 
Courts. 

There is no greater source of hatred for law and judicial 
process than this travesty and mockery of Justice. 

The abuses of injunctions in cases of strikes and boycotts are 
comparatively rare, and easily remedied, but the wrongs legally per- 
petrated in damage suits are a matter of universal and daily ex- 
perience. 

As soon as a workman is injured, and claims his indemnity in 
courts, his employer may put him on a black list and persecute him 



100 NATIONAL BUSINESS CONGRESS 



to death, and the very nature of the law produces this artificial and 
monstrous antagonism. 

Lawlessness and class hatred are the legitimate progeny of a 
procedure which ought to be rejected by every great and civilized 
people, as it has been by Germany. 

Why follow precedent of the past for a guide in a new and 
different economic world ? What we need is insurance of income in 
all cases of accident, whether from negligence of employer, or from 
risk of the trade. 

THE POWER OF ASSOCIATION. 

By a reflex movement, perhaps of discomfort rather than from 
scientific guidance, employers and employes are performing all 
sorts of experiments with Insurance. 

Blind and faulty as those gropings are, they must be made the 
starting point for a scientific and complete system in the future, as 
acorns produce oaks. 

The principle of association for mutual protection in the emer- 
gencies of existence manifests itself in the Clubs and local Benefit 
Societies which are formed everywhere in the country. 

Fraternal Societies of National scope and local lodges, all fede- 
rated in the common interest, have with slow and irregular march 
educated millions of people in the elementary principles of social 
insurance. 

They have demonstrated the possibilities of economy of ad- 
ministration. The Mutualists of France have shown that not only 
sickness insurance and death benefits, but also Old Age Pensions 
can be provided by this method, with proper Governmental aid and 
supervision. 

Some of the Trade Unions have added insurance features of 
various kinds, and have achieved a moderate success with unem- 
ployment benefits, but they have failed to insure the workmen who 
are on low and uncertain income. 

// a system of compulsory accident insurance were organized 
and applied and enforced, Trade Unions would still be free to pro- 
vide sickness and invalid insurance, but they can never furnish ade- 
quate Accident Insurance. 

Society has no right to require them to carry a risk which is 
part of the real cost of production, and should be borne wholly as 
part of the expenditures of production. 



NATIONAL BUSINESS CONGRESS 101 

INSURANCE VERSUS SAVING. 

One principle has been taught to millions of persons by all these 
schemes of Insurance — the principle of Insurance as opposed to 
Savings. 

The minute a man joins an Insurance Society, he gains a claim 
on a Fund which he could not "save" in twenty years 

Furthermore, men are discovering that co-operation with others 
opens a finer way of life than depositing premiums to an individual 
account. 

There is scarcely a good manufacturing or transportation com- 
pany which is not employing legal talent to recommend methods of 
insurance. To this cause they are driven all the more by the ten- 
dency of legislators to lay upon corporations creations of the state, 
burdens of liability which they do not think of imposing on private 
employers. 

The consequence is that the directors of large enterprises are 
looking about for a method which will at once conciliate employes, 
and avoid the waste of litigation and damage suits. 

WE MUST MAKE INSURANCE COMPULSORY. 

No voluntary system of insurance can be economically admin- 
istered, save upon a foundation of compulsory insurance. The 
reason is obvious, and all the schemes in existence illustrate the law. 

So long as accident insurance continues to be optional, many 
employers and employes will neglect organization, and they will 
hamper or even defeat those who are willing to organize. 

Employers feel that they cannot afford to support accident in- 
surance at their own cost, so long as they are liable to pay heavy 
damages to injured workmen, or fight them in the court; and the 
law always keeps them in a fighting mood. 

So long as part of the employers refuse to carry these extra 
premiums, their competitors are economically compelled to follow 
their example. 

WHAT COMPULSORY INSURANCE WOULD DO. 

A compulsory insurance law would at one stroke of the pen 
remove the burden created by the present liability for negligence 
and the appalling waste in Casualty Company fees and litigation. 



102 NATIONAL BUSINESS CONGRESS 

At the same time the amount now wasted or misdirected would 
be available for an accident and sickness insurance fund of vast 
magnitude. 

At present an enormous sum is spent for soliciting business, 
settling claims, etc. This is all waste; because under compulsory 
insurance, employers would seek the means of meeting their respon- 
sibilities. 

CONSTITUTIONALITY. 

That which is economically necessary and otherwise socially 
imperative will ultimately be found constitutional. In all our his- 
tory there has been no exception to this rule, although at every step 
into a brighter world, judges have solemnly denied the possibility, 
and lawyers have turned back to their case books with a smile of 
pity for the philanthropists or bitter sarcasm for the agitator, who 
ruffled the calm sea of their precedents. 

AMERICANISM. 

We are told that compulsory insurance is un-American. That 
assertion is contrary to the most obvious facts in our history. We 
are a law abiding people, and love to make laws. Every statute and 
court ruling is compulsory. We are so used to compulsion in the 
common interest that we forget it, as we are unconscious of the 
atmosphere. 

It is the vital element in which we enjoy freedom, security, 
order and opportunity. 

By compulsory laws we build and maintain roads and bridges, 
and very often against the mean protest of the minority, who would 
be content to stick in the mud. 

By compulsory laws we secure parks and pleasure grounds, and 
secure a revenue by diverting money from the liquor traffic. 

Within my memory, in the Middle West, a large if not respect- 
able minority railed at the Public School law as robbery, and in- 
sisted that any man had the right to bring up his offspring in 
brutish ignorance if he wished to do so. 

We have compulsory taxation to relieve the poor, the insane, 
the idiotic, the indigent. This means that the conscience of a 
modern nation will not permit a human being, however inefficient 
or unworthy, to perish without an offer of at least a minimum 
supply of the necessities of life. 



NATIONAL BUSINESS CONGRESS 103 

Where is the Americanism in sheltering criminals, prostitutes, 
ignorant ne'er-do-weels and degenerates, and denying shelter to 
honest workmen, except on terms revolting and debasing. 

SOCIETY. 

The popular campaign against tuberculosis has revealed to 
the common mind the meaning of the "Police Power" of the State 
and the significance of public health administration. 

No man can stick unto himself, especially in a crowded fac- 
tory or tenement house. Those who are too ignorant, poor or 
negligent to keep well, are taken in hand by the Commissioner of 
Health. Those who suffer from infectious diseases are isolated in 
special hospitals, or warning bulletins are posted at the front door. 
It is notorious that people of small incomes go to physicians and dis- 
pensaries only in the last resort, from fear of expense their incomes 
cannot meet. 

Society is discovering that neglect of disease or wounds in- 
volves the public and is dangerous. 

CLASS LEGISLATION. 

In reply to those who declaim against compulsory insurance as 
class legislation I say emphatically it is not class but social legis- 
lation, because all members of society reap its advantages, just as 
rich men who send their children to private schools derive benefits 
from the public schools which educate the poorer neighbor. 

Under compulsory insurance an injured workman places him- 
self instantly under expert medical advice instead of legal advice, 
and is more surely and speedily restored to industrial efficiency, 
instead of penury, and so becomes again a producer of social 
wealth. 

Compulsory Insurance is the best public health measure yet 
conceived of. 

THE PHYSICIAN. 

Has any one investigated the cost and moral degradation 
caused by the non-payment of medical service? It is notorious 
that physicians annually contribute millions of dollars to patients 
who will not or cannot pay. Is not this a compulsory tax on 
physicians ? 



104 NATIONAL BUSINESS CONGRESS 

I feel certain that it is not cheerful philanthropy. Physicians 
cannot refuse the call of a wounded or sick person and cannot re- 
quire advance payments, as landlords and grocers can. Public 
opinion and the ethics of their profession, require them to rise in 
the night, and through storms to help those who suffer; and this 
without hope of payment. 

Gentlemen, I submit this is unscientific and barbarous ; wholly 
unnecessary. Physicians should have a social guarantee of pay- 
ment. A Compulsory Insurance law fund would be such a guaran- 
tee. 

How can we secure prompt and economic application to the 
medical profession, without pauper relief. The answer comes 
from Germany: "By compulsory and universal sickness insur- 
ance." There is no other anwser. 

MALINGERING. 

The fear is often expressed that if workmen are insured 
against accidents, they will claim benefits on slight pretexts in order 
to get a vacation. Experience proves the contrary. Men instinct- 
ively avoid pain and mutilation. Benefits never equal wages, and 
if there be such an evil, medical certificates would reduce it; but 
the evils of malingering are not to be weighed against the well- 
known miseries of the present situation. 

INSURANCE COMPANIES. 

Naturally, insurance companies would be unwilling to submit to 
changes in the field of accident and health insurance, by compulsory 
laws of the State, but to perpetuate the present system for their 
benefit, would not only be class legislation, but a social crime. 

Compulsory State insurance is an imperative social necessity. 
And whatsoever stands in its way must be swept away. 

IN CONCLUSION. 

A compulsory school education was necessary for the intellec- 
tual education of the masses. Compulsory Insurance is necessary 
for the economic well-being of the masses. The fear that com- 
pulsory insurance would hinder the development of free activities 



NATIONAL BUSINESS CONGRESS 105 

of association has been completely allayed by the astonishing expe- 
rience of Germany. 

Compulsory insurance is the inevitable result of measures al- 
ready taken by leading employers. The greatest managers have 
already entered seriously upon a policy of insurance in some form, 
though ever so inadequate and crude ; and every manager who as- 
sumes financial burdens in this direction finds his pecuniary interest 
threatened by those less intelligent, progressive, and humane. 

What must be the effect? The only means of equalizing the 
burden is by legislation compelling all employers to bear the same 
load; and preventing the meanest and most narrow-minded from 
deriving an advantage over the best employers. 

Therefore, every voluntary scheme which is introduced, brings 
some more powerful ally to the cause of compulsory insurance. 

Soldiers who are injured in the service of their country claim 
and receive public support. Americans boast of their generosity 
to the veterans of the Civil War. The workers engaged in modern 
industries are as much social servants as soldiers fighting for their 
country. How humiliating then it is to a self-respecting citizenship 
that the families of those who are injured or killed in public or 
social service, should bear the whole burden of their support, or 
that the unfortunate soldier of industry should suffer from inade- 
quate support. In no state of the Union is there at present an 
insurance law which does justice to injured workers and their 
families. We Americans are among the greatest sinners in this 
matter. With our great wealth, we do the least. Shame alone 
must soon urge us to action in this matter. (Applause.) 

Mr. Jones (of New York) : Mr. Chairman and Gentlemen — I 
have been very much interested in what Mr. Martin said, and I 
would like to ask Mr. Martin, who evidently has given this ques- 
tion considerable thought, whether, carried to its limits, compulsory 
insurance would not solve the question of labor unionism ? It struck 
me so as I listened to him. It seems to me that all that holds 
labor unions together is the benefit they offer in time of non-em- 
ployment, sickness or death, from the amount contributed weekly 
by the workmen. If that amount were provided by the state, if 
compulsory insurance became a fixed thing, would not, I ask Mr. 
Martin, as an ultimate result, the labor organizations fall? 



106 NATIONAL BUSINESS CONGRESS 

Mr. Martin : I think they would. I agree with you there. I 
think the time has come for insurance, after the actions of the Mc- 
Namaras. I think it is proven that the working men in our land 
have never really been heard from. They have been under the 
power of the chairmen of their organizations, or whatever officer it 
was, and if they showed any independence or showed any desire 
to debate, or discuss things, they have been crushed and their fami- 
lies and themselves have been made slaves. That has all been proven 
by the confessions of McNamara, and I think the time has come 
for compulsory insurance; and I also think it is going to be a vast 
, benefit to the world. The German Ambassador to England and 
myself discussed the subject for two hours and he said to me: "Fred 
Martin, it has solved the problem of poverty in the land." He said : 
"The way our men were leaving our land has stopped; since it has 
been put in practice in our land it has practically stopped it all. 
Very few of them are going comparatively. It raises the laborer 
to a position of self respect; it makes him feel that in some way 
he is a co-partner with his employer; and when a man is worried 
about some accident befalling him, or falling ill and being unable 
to pay the doctor, he cannot do his work as well as a strong man 
without those worries, and he works with an interest, and as though 
he were in co-partnership with his employer." 

Last May when Lloyd George sprang this question upon Eng- 
land I became very much interested, and have been studying it ever 
since. I have the feeling that it is going to allay the unrest. 

Mr. Bruce (of Wisconsin) : Mr. Chairman, I would like to 
ask Mr. Martin a question, but before doing so I want to say this : 
I spent considerable time in Germany and England last year study- 
ing this question for the purpose of aiding in the formulation of 
considerable legislation in the State of Wisconsin. I agree to the 
humanitarian, the ethical arguments that Mr. Martin advances, and 
I want to say that I believe the average American manufacturer is 
as humane and as just as are the manufacturers of the Old Coun- 
try, but I would like to have Mr. Martin tell us how we can make 
a law that is compulsory? 

He has pointed to Germany several times. Germany has today 
the best workmen's compensation act in the world. I would like to 
have him tell me how we can make a law of that kind constitutional 
in any one of the American states. In New York state the law has 



NATIONAL BUSINESS CONGRESS 107 



been declared unconstitutional. In Wisconsin, within the last two 
weeks, the law has been declared constitutional, but because the law 
is optional and not compulsory. I would like to know how he can 
make any one of these beneficent industrial insurance laws, or work- 
men's compensation laws stick and be constitutional in any one of 
the American states. 

Mr. Martin : That will have to be worked out. This is only 
the synopsis. I am writing on the subject. Some of the maga- 
zines in New York have asked me to write on it. 

Mr. Falk (of Wisconsin) : Mr. Chairman, I should like to 
ask Mr. Martin and Mr. Bruce who have referred to the German 
system, whether they have seen the literal treatise by Herr von 
Freudenberg (I think he is the president of the German Imperial 
Insurance Office, and has been for many years), who goes into this 
subject very thoroughly and very exhaustively, and I think every- 
one who has read it will agree with me that it is a great work. 

Mr. Bruce : I have learned of that pamphlet and of its con- 
tents. While in Germany I made it a point to interview the manu- 
facturers, the employers, the employes, and some of the political 
factors. I spent considerable time with the socialist leader of the 
German Reischstag, who is opposed, and has been; his party has 
been opposed because it would bring about a better feeling between 
employer and employes. 

The argument Mr. Martin makes is correct, as far as my hum- 
ble judgment goes, but there are weaknesses all along the line. I 
spent some time with the people in the larger cities, and went out in 
the villages, and every village in Germany has some industries, and 
the law, being compulsory, reaches every wage worker, except cer- 
tain superintendents and officials in manufacturing concerns. 

Now, that the German law is protected, is demonstrated by 
this fact: The Reichstag, in 1881, with the German Professor, de- 
vised this law. Last year when I was in Germany there were amend- 
ments submitted to the Reichstag that filled a large volume ; so that 
I think you may say any of these systems may be found fault with. 
I do not agree with the charge that the German industrial law is a 
failure. I do hold, as others there hold, that it is defective in many 
respects ; but a few years ago, at a big labor conference in Rome, it 
was openly agreed by the economists throughout Europe, who w r ere 



108 NATIONAL BUSINESS CONGRESS 

represented at this great Congress, that Germany had a most effi- 
cient industrial insurance law, in fact the most efficient in the world. 
And why is it efficient? Because it is absolutely compulsory; there 
is no way of getting away from it. 

But I say, gentlemen, the best law that was ever devised on this 
subject cannot, as far as experience goes in this country, be made 
compulsory, and I would like to see the legal genius come here and 
tell us how such a law can be made compulsory. 

Mr. Sechler (of Moline, Illinois) : Mr. Chairman, while in 
the last five years there has been an influx of Italian and Greek 
laborers in our town, simply coming to this country to accumulate 
a small amount of money and go back and live in their own coun- 
tries, the body of men who have been working steadily, 85 per cent 
of the working men of Moline, own their own homes. The sav- 
ings deposits in our savings banks amount to $7,000,000, which 
represents practically the savings of 4,000 working men, or an 
equivalent of about $1,750 per man. In the larger establish- 
ments the men have their mutual aid organizations, providing for 
sick benefits and burial expenses, and in the older concerns they 
have a pension which has gone into effect the last year, that after 
a certain term of years in service a man is retired on, I think, two- 
thirds of the pay which he had been receiving during his working 
time. That is one town. I have no doubt there are other places 
that can duplicate it. 

Moline may be an exception. This I will say to Mr. Kirby; 
Moline is an open shop from end to end. There are no drains on 
the men's wages for the support of Mr. Gompers and his auxili- 
aries. But I believe if that same condition extended through the 
country, as we have it there, it would obviate the necessity of fra- 
ternal insurance on the part of the federal or state government. 
As I stated the amount of savings represented by our workmen 
there, probably they average more than any amount of insurance 
that could be given by the state. 

Mr. Briggs (of Minnesota) : A question that has interested 
me very keenly is this: As I understand it, Germany has had this 
insurance law, or workmen's compensation act for something like 
twenty years; England for some time. As a result did that solve 
the question of unionism in those countries? I understood you to 



NATIONAL BUSINESS CONGRESS 109 

say you thought it would in those countries. Would it in this coun- 
try? 

Mr. Martin : I do not understand it is in operation in Eng- 
land. 

Mr. Briggs: Yes. 

Mr. Martin : Just being put in operation ? 

Mr. Briggs : It has been there for years. 

Mr. Bruce : England adopted its workmen's compensation act 
a little over two years ago; they had had about one year's experi- 
ence when I was there. The effect of the law was this: That it 
increased the insurance rate materially and also increased the liti- 
gation and did not cement between employer and employe. 

Mr. Briggs : Thank you. 

A Delegate: I move the convention adjourn for luncheon. 

The Chairman: Gentlemen, before we adjourn, I wish to 
announce that there will be a free discussion on the business sub- 
jects directly after the address by Mr. Pavey. I beg that you will 
all meet promptly at half past two. 

The meeting adjourned until 2 :30 o'clock P. M. 



110 NATIONAL BUSINESS CONGRESS 



FOURTH SESSION. 

Tuesday, December 12, 1911. 
2 :30 o'clock P. M. 



The Congress was called to order by President Sheldon. 

Mr. Boothe: Mr. Chairman, up until a few moments ago I 
was living under a considerable misapprehension. I speak now 
because there may be others here laboring under the same misap- 
prehension. I was under the idea that this convention was a con- 
vention of thje National Business League of America, and I spoke 
under that misapprehension. As perhaps most of you know, and 
all men ought to know, this is a convention held in Chicago through 
the courtesy of the National Business League of America as our 
entertainers, but is a convention of the business men of this coun- 
try, the National Business Congress, and if there are any now labor- 
ing under the misapprehension that it is simply a convention of the 
National Business League of America, it ought to be corrected. 

The Chairman : I think it is pretty thoroughly understood 
that this is not the convention of the Business League. It is a 
National Business Congress under the auspices of the National 
Business League, which is one of the delegates and has its delegates 
on the floor, the same as any other organization. 

We have one or two resolutions here that have been sent in that 
I should like to have read and then referred to the Resolutions 
Committee, which is going into session very soon. After that we 
will proceed with the regular business. 

The following communication was read : 

George W. Sheldon, Esq., 

President of the National Business League. 

I submit the enclosed on waterways which I would appre- 
ciate being read to the Congress if an opportune time presents 
itself. This is the briefest manner in which I could bring it up, 
and having become deaf will not trust my voice to enter it 
verbally. Respectfully yours, 

G. Boggs, 
Delegate for Baltimore. 



NATIONAL BUSINESS CONGRESS 111 

To the President and Members of the National Business Con- 
gress. 

Gentlemen : 

In the Official Program of the National Business Congress 
the delegates are invited to make terse suggestions on the sub- 
jects that might be of interest to this important meeting. Tak- 
ing advantage of this, and in view of the many questions of 
national importance which have the attention of Congress, I 
will call your attention to that very vital one, the development 
of the waterways of the United States. Every man who has 
taken an interest in this subject knows that our methods here- 
tofore have been haphazard, inefficient even to the point of 
the ridiculous. It has gone further in this line and river and 
harbor appropriations have earned the term "pork barrel." The 
National Rivers and Harbors Congress, which was organized 
in Baltimore in 1901, has been striving to bring about a scien- 
tific plan and policy for the efficient and sensible improvement 
of our internal waterways. It has adopted a policy, not a proj- 
ect, for this purpose. Waterways Associations have been 
organized in the several sections of the country and are earn- 
estly at work on their enterprises, and are uniting with the 
now great Rivers and Harbors Congress in the national move- 
ment for developing waterways along the plan like that in 
vogue in the great European countries. The European coun- 
tries in this, that they have eliminated all local interests in 
order to make the matter a uniform and national one. Among 
those bodies are the Lakes-to-the-Gulf Deep Waterway Asso- 
ciation and the Atlantic Inland Waterway Association. The 
purpose of the former is to open adequate navigation between 
the Great Lakes and the Gulf of Mexico; that of the latter is 
to provide deeper waterways from Cape Cod to the Gulf of 
Mexico, avoiding the ocean graveyards along the New Eng- 
land coast and Cape Hatteras. This will not only subserve 
common interests, but the national defense. We, therefore, 
recommend and urge that this Congress put itself on record 
on the development of the waterways of the United States 
along the most efficient lines. 



Respectfully submitted, 



G. Boggs, 



Delegate Representing the Merchants and Manufacturers' 
Association of Baltimore, Md. 



112 NATIONAL BUSINESS CONGRESS 

The Chairman : Gentlemen, what is your pleasure with this 
resolution? If there is no objection, we will refer it at once to the 
Resolutions Committee and let them make their report on it. We 
will so refer it. 

The following communication was read: 

Baltimore, Md., December 11. 
George W. Sheldon, 

Chairman National Business Congress. 

Dear Sir: 

As a delegate of the Merchants and Manufacturers' Asso- 
ciation of Baltimore, I regret to inform you that an unlooked 
for emergency has arisen which will prevent me from attend- 
ing the National Business Congress to be held on December 
11th, 12th and 13th, at the Congress Hotel, Chicago. 

Much has been said and written regarding the conserva- 
tion of forests, coal and public lands, but I have heard no one 
defending and extending a protecting hand over the business 
interests of the land from which 95,000,000 people must largely 
derive food, clothing and shelter. On the other hand, legislation 
is enacted and being enacted by Congress and by nearly every 
State Legislature which is not only against public service cor- 
porations, but against every other corporation and business 
interest of any importance. May I trust that this view of the 
situation will be discussed? 

Regretting I cannot be with you, I beg to remain, 

With great respect, John R. Blank. 

The Chairman : Gentlemen, if there is no objection we will 
refer this to the Resolutions Committee, with the other resolution. 

I now have the pleasure of introducing the Honorable Frank 
D. Pavey, of New York, who will address us on "AMENDMENT 
OF THE SHERMAN ANTI-TRUST LAW, TO PROTECT 
LEGITIMATE COMBINATIONS OF LABOR AND CAPI- 
TAL." (Applause.) 

Mr. Frank D. Pavey : Mr. Chairman and Gentlemen — When 
I was invited to make an address before this Congress I telegraphed 
to your Secretary and asked if I could have leave to print, and I 
have printed, the views which I then entertained in New York. 
Now, since I have been in Chicago my view has somewhat changed. 



NATIONAL BUSINESS CONGRESS 113 

In the first place, there has been a personal change in my point of 
view. I left New York under the impression that business in this 
country was under serious depression, and, as a result of a two 
days' stay here, having dined and lunched yesterday with Mr. Shel- 
don, I have come to the conclusion that business in Chicago lives in 
a bower of roses and sails on a sea of champagne. (Laughter.) 
Personally, I am entirely relieved of that dyspeptic idea that busi- 
ness is under any depression out here. But in a much more seri- 
ous way my point of view has changed, and it is perhaps not 
entirely changed, but modified, and it has been modified by the 
broad expressions of view that I have heard here from Mr. Revell 
and Mr. Wallis and Mr. Kirby upon the same general subject upon 
which I am speaking. I do not include in that remark addresses 
delivered by Mr. Martin and Dr. MacClintock and Mr. Rosenthal, 
because those were upon subjects a little more remote from the one 
upon which I am going to speak. 

Now, I was brought up as a good Presbyterian, and I was 
always very much impressed with the fact that an orthodox Presby- 
terian minister, before giving utterance to his own ideas always 
read what he called the text from which he was going to preach, 
and following the custom of this old Presbyterian minister, under 
whom I received my early religious training, I wrote out what I 
would call the text of my remarks, and, while reading is always 
more or less tedious, I am going to read those two printed pages in 
order that I may bring before the gentlemen here the text of my 
remarks, and then I can fit my remarks into them as I go along. 

I start with the proposition that no court or executive depart- 
ment or industrial commission can enforce a wrong law so as to pro- 
duce right results. 

The question whether the determination of particular cases 
shall be made by the courts or by an executive department or by 
an industrial commission is a matter of convenience and efficiency 
in the enforcement of the law and not a matter of principle. The 
decision of all such questions must be made by men. The selection 
of the set of men is a matter of policy. Their application of the 
law to particular cases will in any event be full of errors of human 
judgment and opinion. 

As long as the law is wrong in principle their decisions can- 
riot be just and at the same time in accordance with the law and 
facts. 



114 NATIONAL BUSINESS CONGRESS 

All will agree that the law ought to recognize and protect all 
legitimate combinations of labor and capital. An agreement as to 
what combinations of labor and capital are legitimate is difficult. 
Every man's opinions will be influenced by his training and environ- 
ment even when they are not controlled by his immediate business 
interests. 

The conclusions of the writer are that the Sherman Anti-Trust 
Law ought to be amended so as to provide in substance : 

(a) All organizations, associations, combinations and agree- 
ments the purpose and effect of which are to increase the wages and 
improve the conditions of employment of labor are lawful unless 
they violate rights of life, liberty or property. 

(b) All organizations, associations, combinations and agree- 
ments the purpose and effect of which are to regulate competition, 
improve the conditions of business and increase the profits of capi- 
tal are lawful unless they violate rights of life, liberty or property 
or injure trade or commerce. 

(c) Congress shall from time to time define and prohibit spe- 
cific acts and things which are deemed to injure trade or commerce. 

(d) Violations of the law shall be punished by penalties im- 
posed upon the individuals responsible for the violations and not 
by injury to business or destruction of investments or confiscation 
of property. 

The test proposed for labor organizations is that they shall 
not violate rights of life, liberty or property. These rights have 
been the subject of so much adjudication both in the Federal and 
the State courts that no statutory definitions of them are necessary. 

Another test is added for organizations of capital, viz., that 
they shall not injure trade or commerce. By reason of the fact that 
there is no Federal common law or uniform common law of the 
States, statutory definitions of injuries to interstate trade and com- 
merce as well as statutory remedies are necessary. 

The facts and reasons which lead to these conclusions are set 
forth in the annexed argument. 



NATIONAL BUSINESS CONGRESS 115 



ARGUMENT. 



THE SHERMAN ANTI-TRUST LAW. 



The Sherman Anti-Trust Law does five things: 

1. It declares that all contracts or combinations in restraint 
of interstate trade or commerce are illegal and that all persons 
who monopolize or attempt to monopolize any part of interstate 
trade or commerce are criminals. 

2. It makes all violations of the law misdemeanors, punish- 
able by fine and imprisonment. 

3. It confers upon the United States courts jurisdiction to 
punish violations of the law and imposes upon the United States 
district attorneys the duty of enforcing the law. 

4. It provides for the forfeiture to the United States of any 
property owned under any such contract or by any such combina- 
tion. 

5. It confers upon persons who are injured in their business 
or property by reason of violations of the law the right to recover 
damages for the injury. 

All criticism of the Sherman Anti-Trust Law must refer to 
the sections which declare that all contracts in restraint of inter- 
state trade or commerce are illegal and that all persons who monop- 
olize or attempt to monopolize any part of interstate trade or com- 
merce are criminals. 

Plainly there can be no objection to making the violation of 
any law a misdemeanor, punishable by fine and imprisonment; or 
to conferring upon courts jurisdiction to punish violations of any 
law ; or to imposing upon the district attorneys the duty of enforc- 
ing any law; or to giving persons injured by any illegal act the 
right to recover damages. 

The forfeiture to the United States of any property owned 
under any such contract or by any such combination would be so 
ineffectual as a remedy for any of the evils intended to be cured 
by the law that almost no effort has been made to enforce the pro- 
visions of that section. 

A MENACE TO PROSPERITY. 

A list recently compiled from Moody's Manual shows that not 
less than 1,198 corporations with 8,110 subsidiaries representing a 



116 NATIONAL BUSINESS CONGRESS 

total capitalization of $10,612,372,489 are "holding companies" 
within the prohibition of the law. Many holding companies are 
not reported in Moody's Manual. There is a legion of bondhold- 
ers, stockholders and laborers the stability of whose investments 
or employment will be endangered by the general attempt to enforce 
the act. 

Practically all trade organizations and associations for the im- 
provement of business conditions which do anything more than 
have an annual clambake exist in violation of the law. All labor 
organizations incur its penalties whenever they strike or attempt 
by concert of action to increase their wages or improve their condi- 
tion. 

The law as it stands is unjust and injurious to public interests 
and its general enforcement is a menace to present prosperity and 
may be a permanent injury to the trade and commerce of the 
country. 

The answer may be made that the Supreme Court in the recent 
decisions in the Standard Oil and American Tobacco cases has laid 
down a safe rule for the guidance of business. This idea has been 
advanced by President Taft, who is reported to have said in a 
speech at Aberdeen, S. D. : 

I have challenged, and I challenge again, any person to 
cite a case that he would condemn as a violation of the Anti- 
Trust Law that would not be condemned under the decision 
of the Supreme Court. As yet I have heard no reply. 

The correct reply is that no person can cite a case that would 
not be condemned as a violation of the Sherman Anti-Trust Law 
under the decision of the Supreme Court because the Supreme 
Court has not defined any case that would not be condemned. 

It has decided that certain cases which have already come 
before it are violations of the law and that cases which come before 
it in future will be "determined by the light of reason, guided by 
the principles of law and the duty to apply and enforce the public 
policy embodied in the statute." 

With this lucid rule as a guide the business of the country is 
left to guess what will be the decision of the Supreme Court in 
selected cases brought before it in future at the will of the Presi- 
dent and Attorney General. 



NATIONAL BUSINESS CONGRESS 117 

THE FETICH OF COMPETITION. 

Much confusion in the reasoning and decision of cases has 
grown out of the failure of the courts to distinguish between re- 
straints of trade and restraints of competition. The Sherman Anti- 
Trust Law prohibits restraints of trade and does not prohibit re- 
straints of competition. In the application of the law the courts 
have treated all contracts or combinations in restraint of competi- 
tion as contracts or combinations in restraint of trade. This fal- 
lacious application of the law has its foundation in the ancient and 
honorable maxim of economics that ''competition is the life of 
trade." The courts have generally accepted this maxim as the 
basis of their reasoning in the decision of cases arising under laws 
in regard to restraint of trade. Their reasoning has been that 
inasmuch as competition is the life of trade anything which re- 
strains competition must necessarily restrain trade. 

This economic doctrine may have been true when applied to 
the industrial conditions existing in the time of Adam Smith. But 
when applied to the conditions of modern industry unrestrained 
competition may be the death of trade. It does not require much 
business experience to know that contracts or combinations in rea- 
sonable restraint of reckless competition may promote trade, im- 
prove business conditions and increase the profits of capital and 
wages of labor without injury to any public interest. 

The primary purpose of every trades union, federation of labor 
or brotherhood of workmen is to restrain competition by securing 
for all their members uniform wages for the same work and uni- 
form hours of labor for all. No member is to be allowed to com- 
pete against another either for more pay per hour or for more hours 
per day. Every law fixing the number of hours that shall constitute 
a day's labor is an enactment in restraint of competition. Every 
law prescribing terms and conditions upon which persons may en- 
gage in various occupations is a restraint upon competition. The 
number of legalized restraints upon competition is so great that an 
enumeration and description of them would fill a volume. 

Notwithstanding these facts the confidence of public officials 
in the inherent virtue of competition as a sure cure for all indus- 
trial and commercial evils is undiminished. While the Attorney 
General is talking in favor of the restoration of competition the 
Department of Justice of which he is the head has been drawing a 
decree in the United States District Court for the Northern Dis- 



118 NATIONAL BUSINESS CONGRESS 

trict of Ohio in the case of the General Electric Company and 
about thirty-five subsidiary and affiliated companies which con- 
tains the following remarkable clause: 

Eighth : That the General Electric Company and the 
other defendants are each enjoined and restrained from offer- 
ing or making more favorable prices or terms of sale for in- 
candescent electric lamps to the customers of any rival manu- 
facturer or manufacturers than it at the same time offers or 
makes to its established trade, where the purpose is to drive 
out of business such rival manufacturer or manufacturers, or 
otherwise unlawfully to restrain the trade and commerce of 
the United States in incandescent electric lamps; provided that 
no defendant is enjoined or restrained from making any prices 
for incandescent electric lamps to meet, or to compete with, 
prices made by any other defendant, or by any rival manufac- 
turer; and provided further that nothing in this decree shall 
be taken in any respect to enjoin or restrain fair, free and 
open competition. 

This portion of the decree is either a joke or art injustice. The 
companies in the combination were enjoined from entering into any 
combination or agreement fixing prices for incandescent electric 
lamps. What need of any agreement fixing prices when the court 
at the request of the government enjoins companies practically con- 
trolling the entire trade of the country from cutting prices. It is 
not surprising that the companies in the combination all consented 
to the making of this decree. 

If there were no independent companies the decree was a 
joke on the American people by the Attorney General with the con- 
sent of the companies and the approval of the court. If there were 
independent companies the decree was an injustice because the 
independent companies were not parties to the suit and were not 
enjoined from seeking to injure the business and secure the trade 
of the companies in the combination by cutting prices. 

Whether joke* or injustice, it was doubtless perpetrated unwit- 
tingly. The man who drew the decree was dimly conscious of the 
fact that the object truly desirable to be attained was not the main- 
tenance of competition, but the maintenance of stability in trade. 
He therefore enjoined the companies from using the only effective 
method of competition, but added a disclaimer of any intention of 
backsliding from the orthodox faith in competition. 



NATIONAL BUSINESS CONGRESS 119 

THE TRUE. RULE OF COMPETITION. 

The fundamental principle of competition is the law of the 
survival of the fittest. Competition means success for the strong 
and failure for the weak. The authors of the platform of the 
Socialist party adopted at Chicago on May 13, 1908, scorned all 
popular pretenses on the subject. Without equivocation or cir- 
cumlocution they wrote this elementary commentary on the futility 
of all legislative efforts to uphold the divine right of competition 
to be the ruler of industrial life : 

Individual competition leads inevitably to combinations and 
trusts. No amount of Government regulation, or of publicity 
or of restrictive legislation will arrest the natural course of 
modern industrial development. 

If the American people can be led to abandon the worship of 
competition as the idol of industrial life and accept the doctrines 
of co-operation and union which have brought them so much bene- 
fit in their political life they will derive even greater benefits from 
those forces in their industrial life. 

The Sherman Anti-Trust Law is equally unsound in its pro- 
hibition of any and all attempts to monopolize "any part of the 
trade or commerce among the several states or with foreign na- 
tions." 

Every man who is in business is continually attempting to 
monopolize some part of the trade or commerce among the several 
states or with foreign nations. Every man is trying to monopolize 
his own business and to acquire that of his competitors. If this 
section of the law has any meaning in an economic sense it pro- 
hibits competition in all forms. The evils which are intended to 
be condemned by this section against monopoly only arise when 
the monopoly has been established. 

Sound economic doctrines in reference to the permanence of 
the industrial development known as the "trusts" were never bet- 
ter stated than by that distinguished advocate of Socialism Eugene 
V. Debs in an article on the "Problem of the Trusts," published in 
the New York Times, on Saturday, November 25, 1911 : 

No student of economics and no intelligent observer of 
events believes the trust can be forced back into its constituent 
and competing elements to satisfy the cry of a defeated and 
doomed middle class. Only the academic charlatan and polit- 



120 NATIONAL BUSINESS CONGRESS 



ical demagogue, seeking to promote their own selfish ends, yield 
to the clamor of the small interests that the trust be "smashed" 
and that we return to "the good old days of competition/' 

This is but a repetition of the cry of the weavers and spin- 
ners of England against the introduction of the machinery 
which threatened to displace them. It is the protest of the 
stage coach against the locomotive and of the pony express 
against the railroad and telegraph. 

What is a trust? Not a combination of capitalists, as so 
many seem to imagine, for the capitalists are only incidental 
to the trust, as the owner of a mill is incidental to the mill. 
If all the capitalists who own the trusts were to disappear 
from the face of the earth, the trusts in all their inherent 
power and potentiality would still be here. 

The railroads, for illustration, and not the individuals 
who happen to own them, constitute the railroad trust. The 
steel mills and their accessories and equipments of machinery 
for the production of steel, and not the stockholders, constitute 
all that is vital and essential to the Steel Trust. 



CAPITALISM AND SOCIALISM. 

From these sound economic doctrines Mr. Debs draws the con- 
clusion that we are limited to a "choice between industrial despot- 
ism and industrial democracy, that is to say, between Capitalism 
and Socialism." He does not define the organization of industry 
under Socialism, but declares that it has "the one object in view of 
abolishing the prevailing system of privately owned industry and 
establishing in its place the industrial democracy in which all the 
people shall be free to produce what they need to satisfy their needs 
and wants, and free to enjoy all the blessings of a real civilization." 

The fundamental difficulty in the way of the establishment of 
any such Utopian society is not that of "abolishing the prevailing 
system of privately owned industry," but of abolishing the prevail- 
ing system of privately ozvned results of industry — i. e., private 
property. 

The laborer who consistently invests for a period of years a 
portion of his surplus earnings in household furniture and savings 
banks will find himself and his family in a surer way "to enjoy all 
the blessings of a real civilization" than the laborer who invests 
the same portion of his surplus earnings for the same period of 
time in whiskey and tobacco. Until Socialism can produce equal- 



NATIONAL BUSINESS CONGRESS 121 

ity of condition between these two men it cannot establish any such 
industrial democracy as it advocates. 

Private ownership of property is not a product of civilization. 
It existed in the most positive form among the redmen of Amer- 
ica who cannot be said to have enjoyed many of the blessings of 
a real civilization. "There was no authority in an Indian com- 
munity powerful enough to deprive the meanest warrior of his 
property, even in circumstances of the greatest public exigency'' 
(Parkman — "The Conspiracy of Pontiac") 

Until this instinct of ownership of the results of industry and 
frugality in peace and courage and energy in war can be eradicated 
from the breast of savage and civilized man there can be no indus- 
trial democracy such as the Socialists dream of. 

In the meantime society must do what it can to secure for all 
men an equal opportunity to gain the private ownership of a fair 
share of the results of combined industry under a system which 
recognizes the fact so well stated by Mr. Debs "that the trust is 
simply the twentieth century tool of production, distribution and 
exchange." 

DEFINITE RULES OF LAW NECESSARY. 

Definite standards of what combinations of labor and capital 
may lawfully do under the existing system of privately owned indus- 
try must be established. Men should be free to compete and strug- 
gle or combine and co-operate so long as they do not transgress 
necessary and proper rules for the protection of others from undue 
injury. The first step essential to progress is to lay the foundations 
of the law in sound economic principles. 

There has been much discussion as to "good trusts" and "bad 
trusts" and the effort has been made to distinguish between "rea- 
sonable" and "unreasonable" restraints of trade. All this discus- 
sion shows that the language of the present statute does not cor- 
rectly describe the thing which ought to be condemned. The evil 
which is sought to be prohibited is not a restraint of trade or com- 
merce or an attempt to monopolise some part of trade, but an injury 
to trade or commerce. 

If the law prohibited all organizations, associations, combina- 
tions or agreements which violate rights of life, liberty or property 
or injure trade or commerce it would correctly define the causes 
of the evils which it seeks to obviate. The principle of the law 
would be sound and its practical application to particular cases 



122 NATIONAL BUSINESS CONGRESS 

would be less difficult than at present. Under our Federal system 
the national law applicable to interstate trade and commerce can 
be made right in principle only by act of Congress. 

NO NATIONAL COMMON LAW IN THE UNITED STATES. 

There is no common law which constitutes any part of our 
National or Federal jurisprudence as distinguished from the juris- 
prudence of the several states composing the Union. All Federal 
law is founded upon and derives its authority from the constitution 
or laws of the United States. The common law can be incorporated 
into the Federal system of jurisprudence only by Congressional 
enactment. 

The Federal courts cannot resort to the common law as a 
source of criminal jurisdiction; the crimes and offenses which are 
cognizable by these courts are such only as are expressly or by 
necessary implication designated by law and Congress must define 
these crimes, prescribe their punishment and confer the necessary 
jurisdiction to try them. 

Even in the jurisprudence of the several States the common 
law of England cannot be taken in all respects to be that of Amer- 
ica. The English colonists brought with them from their mother 
country its general principles and claimed it as their birthright, 
but they brought with them and adopted only that portion which 
was applicable to their needs and suitable to their situation and 
circumstances. Louisiana and Texas were not English colonies and 
the French and Spanish codes were the foundation of their com- 
mon law jurisprudence. Judicial decisions and the usages and 
customs of the respective States determine in general how far the 
common law of England has been introduced and sanctioned. The 
common law of one State is not necessarily that of another. Each 
State has adopted such parts as are desirable and suitable to its 
needs. 

In the absence of any National common law or any uniform 
common law of the States an act of Congress is necessary, if the 
Federal Government wishes to exercise any supervision or control 
over combinations of labor or capital in reference to trade and 
commerce between the States and Territories and the District of 
Columbia and with foreign nations. The rule in reference to com- 
binations of labor should not be the same as the rule in reference 
to combinations of capital. 



NATIONAL BUSINESS CONGRESS 123 

RULE FOR COMBINATIONS OF LABOR. 

The Sherman Anti-Trust Law has been held to be applicable 
to labor combinations and has been invoked against them on sev- 
eral occasions. There is grave doubt as to whether the authors of 
the law had any such intention. There have been repeated in- 
stances of violations of the law by labor organizations when it was 
not invoked against them. One of the recent instances was the 
strike of the employes of the express companies in New York and 
New Jersey in October and November, 1910. For a period of more 
than a month it was almost impossible for any interstate trade or 
commerce in express packages to be done across the Hudson River 
between the States of New York and New Jersey. The restraint 
extended to all interstate trade and commerce in express packages 
between the States south of New Jersey and east of New York. 
The leaders of the labor organizations engaged in the strike made 
no concealment of their identity or active participation in the re- 
straint of interstate trade and commerce. The violation of the law 
was open and notorious. Under the Sherman Anti-Trust Law it 
was the duty of the United States district attorneys in the South- 
ern District of New York and the District of New Jersey, under 
the direction of the Attorney General, to institute proceedings in 
equity to prevent and restrain the violation. 

No action was taken and no action probably ever will be taken 
by any Attorney General or district attorney in any similar case 
until the strikers arrive at the point where they violate rights of 
life, liberty or property. The invocation of the Sherman Anti- 
Trust Law against a labor organization which is merely engaged 
in a peaceful and orderly strike in restraint of interstate trade and 
commerce is contrary to all modern ideas of the rights of men. 

The correctness of the rule which will make the acts of labor 
combinations illegal only when they violate rights of life, liberty or 
property will be seen from an examination of the legal meaning of 
those terms and a review of the purposes of labor organizations and 
the rights to which their members are entitled by law. 

The words "life, liberty and property" occur twice in the Con- 
stitution of the United States. The Fifth Amendment to the Con- 
stitution provides that no person shall "be deprived of life, liberty 
or property without due process of law." Under the strict con- 
struction of our Federal constitution this amendment was inter- 
preted to mean that no person should be deprived of life, liberty 



124 NATIONAL BUSINESS CONGRESS 

or property by the Federal Government without due process of law. 
This interpretation of the Fifth Amendment led to the adoption 
after the close of the Civil war of a clause in the Fourteenth 
Amendment which provides that no State shall "deprive any per- 
son of life, liberty or property without due process of law." 

The Constitutions of many States provide that no person shall 
be deprived of life, liberty or property without due process of law 
and enumerate among the inalienable rights of citizens the right of 
enjoying and defending life and liberty. 

The presence of these words in the Constitution of the United 
States and various States has led to many judicial decisions as to 
their meaning. One of the best statements of the comprehensive 
scope of their meaning was given by the Supreme Court of Mis- 
souri : 

These terms, "life, liberty and property" are representative 
terms, and cover every right to which a member of the body 
politic is entitled under the law. Within their comprehensive 
scope are embraced the right of self defense, freedom of 
speech, religious and political freedom, exemption from arbi- 
trary arrests, the right to buy and sell as others may — all our 
liberties, personal, civil and political — in short, all that makes 
life worth living ; and of none of these liberties can any one be 
deprived except by due process of law. 

The broad meaning which has been given by the courts to the 
rights designated as "life, liberty and property" makes the infringe- 
ment of those rights a sufficient limitation on the activity of com- 
binations of labor in their efforts to increase wages or to improve 
the conditions of employment. 

The ultimate purpose of all labor unions is to increase the 
wages or improve the conditions of employment of their members. 
The immediate object may be to secure the recognition of the 
organization, the discharge of non-union laborers or the reinstate- 
ment of discharged union laborers because success in these ends 
may strengthen the union and improve its chance of accomplish- 
ing its ultimate purpose. 

Such an object was once considered to be opposed to public 
policy. Labor combinations were held to be illegal and their mem- 
bers were liable to indictment for criminal conspiracy. These de- 
cisions were based on the economic ideas which shaped and guided 
the economic policy of former days. The public interest was sup- 



NATIONAL BUSINESS CONGRESS 125 

posed to require that trade should be protected from any and all 
restraint. Any combination by which the price of anything was 
arbitrarily increased, whether a combination of masters by limit- 
ing production or of workmen by compelling an increase of wages, 
was held to be unlawful. 

These laws for the protection of trade have in recent years 
been materially modified by the admission of exceptions. The 
most notable exception is that in favor of labor combinations. This 
has been done in England and in Canada by the passage of express 
statutes. (Criminal Law Amendment Act — 34 and 35 Victoria, Ch. 
32; Conspiracy and Protection of Property Act — 38 and 39 Vic- 
toria, Ch. 86; Canada Trades Union Act — 35 Victoria, Ch. 30.) In 
the United States the exception of labor combinations from the old 
rule of the common law has been largely due to the action of the 
courts themselves. 

So far as labor unions are concerned the Sherman Anti-Trust 
Law practically inserted in the Federal jurisprudence of the United 
States the common law of England as it existed prior to 1871. It 
is a distinct step backward in the recognition of the rights of men. 

Strikes and boycotts are the familiar means which laborers use 
to win success in disputes with their employers. It is now well 
settled in England and in the United States that a laborer may 
decline to work for any one or with any one. The right of the 
laborer to withhold his labor is absolute and not qualified by the 
effect of the exercise of this right upon others. A striker may by 
persuasion cause employes to leave the service of their employer or 
to dissuade other workmen from seeking employment with him. 
They may lawfully refuse to trade with any person absolutely or 
contingently. The members of a union may lawfully refuse to 
have any dealings with the employer or with any person who deals 
with him. 

If one laborer enjoys this right he ought not to lose it when 
acting with others. The fact that they simultaneously avail them- 
selves of their right ought not to render the act or agreement 
unlawful unless the manner of its exercise makes it so. 

The general recognition of the lawfulness of these means is 
obscured by the fact that they are so often accompanied by unlaw- 
ful acts. The strikers cross the lawful line and resort to violence, 
intimidation, physical injury to tangible property and actual injury 
to that most valuable form of intangible property — the good will 



126 



NATIONAL BUSINESS CONGRESS 



of business. If a concession is wrung from an unwilling employer 
by words or actions which produce in his mind a reasonable fear 
of injury from violence to his person or property; if the members 
of a labor union congregate at or near the works of an employer 
with the purpose and effect of intimidating the employes of the 
establishment; if by their acts they create a nuisance which annoys 
and disturbs an employer or his workmen or customers in the en- 
joyment of their several rights, their action is unlawful and those 
who by concert of action perform these acts are guilty of a criminal 
conspiracy. 

Lockouts and blacklists are the counterparts of strikes or boy- 
cotts. Except so far as they violate rights of life, liberty or prop- 
erty they are lawful. The general principle which ought to apply 
to all such cases of controversies between employers and employes 
is that no acts or combinations in furtherance of such controversies 
which violate rights of life, liberty or property are lawful to either 
capital or labor. 

All that is needed in Federal legislation so far as combinations 
of labor in matters of interstate trade and commerce are concerned 
is the enactment of proper remedies for the enforcement and pro- 
tection of these rights. The remedies must be practical and avail- 
able for use by any person whose interests are endangered. They 
should include: 

1. Suits at law for damages in favor of any person damaged. 

2. Suits in equity for injunctions in favor of any person 
threatened with injury. 

3. Civil proceedings for injunctions by the Government to 
protect public interests. 

4. Criminal prosecutions by the Government to punish guilty 
parties. 

Suits for injunctions and for damages impose on private parties 
the duty and burden of defending their private interests and re- 
dressing their injuries. These two remedies at the instance of 
private parties will in most cases accomplish all that is needed. Any 
general public inconvenience can be endured up to a point where 
the Federal Government will take the initiative to enjoin a con- 
tinuance of the public injury or to punish the offenders by criminal 
prosecution. 



NATIONAL BUSINESS C O N G R E S S 127 

Under modern conditions of industry this limitation is not suf- 
ficient in reference to combinations of capital. It is for this rea- 
son that an injury to trade or commerce has been made an addi- 
tional test of the legality of a combination of capital. 

RULE FOR COMBINATIONS OF CAPITAL. 

The entire judicial and economical history of England has 
been a continuous struggle to suppress monopolies, prevent re- 
straints of trade and maintain competition. The language of this 
heritage of struggle is so firmly imbedded in the minds of all men 
that we continue to use the same phrases after we have ceased to 
deal with the same subjects. These phrases are "monopoly," "re- 
straint of trade," "suppression of competition" and "contrary to 
public policy." 

Monopoly in a strict sense is an exclusive right or privilege 
granted by the state. The principal modern monopolies of this 
class are patents, copyrights and the right of eminent domain. In 
a modern sense monopoly has come to mean the sole control of the 
supply and sale of any article, no matter how acquired. Under 
modern conditions of industry and modern means of transporta- 
tion and transmission of information no such monopoly is possible 
without the protection of the Government in a form of a concession, 
patent, copyright or tariff. 

Restraint of trade and suppression of competition have become 
practically synonymous terms. The maintenance of competition has 
been the battle cry of all persons seeking to secure a more equal 
distribution of the results of labor among the people who con- 
tribute to the production of wealth. 

No modern discussion of anti-trust legislation proceeds very 
far until we find that we are not praising the merits of competition, 
but are denouncing its demerits; not formulating plans to prevent 
restraints of trade, but proposing restrictions on trade; not seeking 
to suppress monopolies, but to create and control them. 

The cheers and hisses are equal in volume. Denunciations of 
"monopoly" and "restraint of trade" are drowned at intervals by 
the clamorous voices of the victims of "unfair" and "reckless" and 
"ruinous" competition. These victims of competition have as great 
need for protection against the crimes of competition as the victims 
of restraint of trade have against the crimes of monopoly. They 
seek the protection of a Federal Anti-Trust Law which shall clearly 



128 NATIONAL BUSINESS CONGRESS 

define what acts and things are injurious to trade or commerce 
under modern conditions of industry. 

This protection is not afforded by the Sherman Anti-Trust 
Law. To what extent it was afforded by the common law of Eng- 
land is a question as to which opinions may differ. 

In its decision in the Standard Oil case the Supreme Court 
reviewed the history of the common law and statutes of England in 
reference to monopolies and restraints of trade and stated its con- 
clusions in the following language : 

From the review just made it clearly results that outside 
of the restrictions resulting from the want of power in an in- 
dividual to voluntarily and unreasonably restrain his right to 
carry on his trade or business and outside of the want of right 
to restrain the free course of trade by contracts or acts which 
implied a wrongful purpose, freedom to contract and to abstain 
from contracting and to exercise every reasonable right inci- 
dent thereto became the rule in the English law. 

In the decision of many cases originating in diverse circum- 
stances and presenting different phases the interpretation of the 
common law presents many apparent inconsistencies. But the guid- 
ing principle of the common law was sound — it refused to enforce 
contracts or agreements in restraint of trade which implied a wrong- 
ful purpose — an injury to the public. 

This brings us back to the starting point. It is a question of 
choice between adherence to the rule of competition or the accept- 
ance of the principle of co-operation and union in trade and com- 
merce. If the people are going to adhere to the prohibition of all 
restraints of competition as the rule of American trade and com- 
merce the Sherman Anti-Trust Law accomplishes that purpose. If 
they are going to accept the doctrines of union and co-operation as 
beneficial forces in trade and commerce an amendment of the Sher- 
man Anti-Trust Law which shall definitely declare these principles 
to be its basis and define what acts and things are in violation of 
these principles is imperatively necessary. 

Many remedies are proposed as a solution of all the difficulties 
of the situation. Those most prominently presented are the estab- 
lishment of an Interstate Industrial Commission; the national in- 
corporation of companies engaged in interstate trade and commerce ; 
the prohibition of holding companies and interlocking directorates. 



NATIONAL BUSINESS CONGRESS 129 

INTERSTATE INDUSTRIAL COMMISSION. 

There is a popular belief in the infallibility of government by 
commission. In any political emergency a prompt suggestion is 
made to establish a commission to solve all questions. The argu- 
ment is made that the enforcement of the law is an administrative 
matter and that it is necessary to have a commission whose true 
function is that of administration. 

The mind is often captivated by a catchword. The word ''ad- 
ministration" plays the role of catchword in the present discussion. 
The statesmen who drew the Federal Constitution and planned the 
Federal system were not amateurs in political science. They ana- 
lyzed the functions of government and separated them into legis- 
lative, executive and judicial. The system was copied and adopted 
by practically all the States. The separation of these three func- 
tions became a fundamental principle of all Republican govern- 
ments. The modern tendency in the United States is to merge the 
executive and judicial functions in a commission and call it an "ad- 
ministrative body." Every administrative commission is merely a 
board for the combined exercise of both judicial and executive 
functions. It is not germane to the purposes of this argument to 
discuss the merits of this merger of the executive and judicial 
functions. The practical question in reference to the anti-trust situ- 
ation is whether the people wish to have an Industrial Commission 
clothed not only with executive and judicial functions, but also 
with legislative power. 

The foremost advocate of an Industrial Commission is former 
President Theodore Roosevelt, who has recently restated his posi- 
tion in the following language : 

What is needed is the creation of a Federal administrative 
body with full power to do for ordinary interstate industrial 
business carried on on a large scale what the Interstate Com- 
merce Commission now does for interstate transportation busi- 
ness. (Outlook, November 25, 1911.) 

Prominent among the supporters of this project are Elbert H. 
Gary, George W. Perkins, Samuel Untermyer and Seth Low, Presi- 
dent of the National Civic Federation. 

This project of administrative control over interstate trade and 
commerce has already been before Congress. In March, 1908, 
President Roosevelt in a special message to Congress suggested that 
the substantive law should remain as at present, but that any person 



130 NATIONAL BUSINESS CONGRESS 

desiring to make a contract in restraint of trade should file the pro- 
posed contract with the Bureau of Corporations or other appro- 
priate executive body. The executive department would have sixty 
days within which to forbid the contract. If the contract were 
forbidden it would then become subject to the provisions of the 
Anti-Trust law if it were at all in restraint of trade. If it were 
not prohibited it would then only be liable to attack on the ground 
that it constituted an unreasonable restraint of trade. 

Judge Elbert H. Gary, Chairman of the Board of Directors of 
the United States Steel Corporation, Mr. Francis Lynde Stetson, 
chief counsel for Messrs. J. P. Morgan & Co., and Mr. Victor 
Morawetz prepared for the National Civic Federation a bill em- 
bodying substantially the recommendations of the President. The 
Judiciary Committee of the Senate made an adverse report on this 
bill in which it said: 

The result is that, technically as to criminal prosecutions 
and practically as to civil prosecutions, a dispensing power, a 
power of granting immunity, is, in the one case, conferred on 
a mere bureau head, and in the other case on an administra- 
tive body, and in both cases without notice or hearing and 
wholly ex parte — a course of procedure that would not be tol- 
erated in any court of our country. 

It is easily comprehensible that the representatives of "big 
business" should be willing to have at Washington an Industrial 
Commission with power to grant indulgences and absolutions. Mr. 
Gary and Mr. Frick have demonstrated their ability to make a mid- 
night trip to Washington and before noon of the next day to get 
from the President and the Attorney-General a practical promise 
of immunity from interference in the acquisition of their most 
important competitor at a time of financial panic when the prop- 
erty was not otherwise salable. 

The serious question is where will the man of small business — 
"the little fellow"— be under the rule of an Industrial Commission? 
How will it promote his prospects of success to have the conduct 
of his business continually "administered" at Washington? Is the 
margin of profit in a small business sufficient to bear the expense 
of maintaining or sending a legal or commercial representative to 
Washington at all times to see that the decisions of the administra- 
tive board are just and satisfactory. Evidently not. The pro- 
moters of the idea themselves limit it to enterprises which do busi- 



NATIONAL BUSINESS CONGRESS 131 



ness "on a large scale." This separation of "big business" is more 
ingenious than generous, more plausible than sound. The probable 
and practical result will be that "big business" will secure immunity 
from the strict enforcement of restrictive and prohibitive laws 
to which "small business" will be subject. 

"Small business" must not be misled by the analogy of the 
Interstate Commerce Commission in transportation. The problems 
confronting the Interstate Commerce Commission were of a con- 
crete character and limited in number — reasonable rates, rebates, dis- 
criminations, undue preferences, equal facilities, long and short 
hauls, continuous carriage and publicity of tariffs. All these prob- 
lems were defined and the corresponding prohibitions stated in the 
law establishing the Interstate Commerce Commission. 

Unless Congress proposes to delegate to an Industrial Com- 
mission the power to legislate there is nothing for an administra- 
tive Industrial Commission to do until the law has definitely defined 
what men engaged in interstate trade and commerce may lawfully 
do and what they may not do. The members of the Industrial 
Commission must either exercise their own opinion as to what the 
law ought to be or have a definite law to guide them in the per- 
formance of their administrative duties. 

In the American Tobacco case the Supreme Court practically 
designated the judges of the United States Circuit Court for the 
Southern District of New York as an Industrial Commission to 
reassemble the parts of that great combination in a manner in con- 
formity to the law. If any of the parties directly or indirectly 
interested were satisfied with the work of the United States Circuit 
Court for the Southern District of New York while sitting as an 
Industrial Commission for the reconstitution of the component 
parts of the American Tobacco Company their satisfaction has not 
received proper notice in the public press. It is doubtful whether 
any President will ever secure four men better qualified to become 
members of an Industrial Commission than the four judges of the 
United States Circuit Court for the Southern District of New York. 
Any criticism of their work must be laid to the indefiniteness of 
the law they were trying to "administer." 

There may be good and sufficient reasons why the establishment 
of an Industrial Commission will make the interpretation and en- 
forcement of a good law more uniform and practical. But these 
benefits cannot be derived from an Industrial Commission or until 
the Commission has a good law. 



132 NATIONAL BUSINESS CONGRESS 

NATIONAL INCORPORATION LAW. 

The national incorporation or registration of companies en- 
gaged in interstate trade and commerce is proposed as a means of 
solving industrial problems. The foremost advocate of a Federal 
Incorporation Law is President Taft. In a special message to Con- 
gress on January 7, 1910, he proposed such a law and has renewed 
his recommendation for its passage in his annual message on 
December 5, 1911. The plan has advantages and there appear to 
be no good reasons why a law permitting national incorporation 
or registration of companies engaged in interstate trade and com- 
merce should not be passed. The law will probably have to be 
made permissive in order to overcome the opposition of the States. 

The enactment of a law merely for the national incorporation 
or registration of corporations will not solve any industrial prob- 
lems. When the companies have been incorporated or registered 
and received their license to engage in interstate trade and com- 
merce they must know the law and obey it, unless they are to be 
licensed to disobey the law. The same question recurs continually 
for definition and decision. What can corporations lawfully do 
and not do? When that definition has been made the question 
whether those acts are done by a corporation organized under the 
Federal law or under the laws of any State is a minor matter. They 
must conform equally to the requirements and prohibitions of the 
Federal law in so far as interstate trade and commerce are con- 
cerned. 

// the advocates of an Industrial Commission and National 
Incorporation would turn their attention from the construction of 
the machinery for the administration of the law to the construction 
of the law they would make more progress in clearing the clouds 
from business. 

Haste makes waste. Congress can start with the adoption of 
a simple law prohibiting only those acts and things which are cer- 
tainly injurious to trade and commerce. The Department of Com- 
merce and Labor can be equipped with men and money to enable it 
to ascertain by investigation what further practices ought to be 
declared by statute to be injurious to trade and commerce. When 
its recommendations have been submitted to Congress from time 
to time a law ought to be evolved which should not require con- 
tinual administration nor continual interpretation, but merely con- 



NATIONAL BUSINESS CONGRESS 133 

tinual enforcement by the usual and ordinary methods of the 
enforcement of any other law. 

The great majority of business men will prefer to give con- 
tinual obedience to a law they understand rather than be subject to 
the continual administration of a law they do not understand. 

The principal concrete suggestions in the direction of precise 
definitions of unlawful acts and things are the prohibition of hold- 
ing companies and interlocking directorates. 

PROHIBITION OF HOLDING COMPANIES. 

The prohibition of holding companies will have at least one 
very simple advantage. It will tend to prevent the centralized con- 
trol of allied industries. It will prevent the permanent control of 
a string of important enterprises by a small number of men whose 
entire investment is only a small percentage of the total capitaliza- 
tion of the combined industry. In many instances the real con- 
trol may be held by men owning a bare majority of the stock of 
one company whose assets are used to acquire control of one or 
more additional companies whose combined assets are in turn used 
in the same manner for the acquisition of control over other com- 
panies. The prohibition of this form of control will accomplish 
much in preventing the concentration of trade and commerce in the 
hands of a few men. 

An unqualified prohibition of any corporation engaged in inter- 
state trade and commerce from holding stock in another will not 
be entirely feasible under our system of States' rights. It will open 
wide the door to discrimination by States in favor of domestic 
corporations and against foreign corporations. Corporations of 
other States are not "citizens" within the meaning of the Constitu- 
tional clause which provides that "the citizens of each State shall 
be entitled to all the privileges and immunities of citizens of the 
several States." Each State may discriminate in favor of its own 
corporations and against those chartered by another State. It was 
to prevent such discrimination as to individuals that the control 
of interstate trade and commerce was given to the Federal govern- 
ment. The absolute denial of the right of a corporation engaged 
in interstate trade and commerce to hold stock in another company 
would make it easier for one State to discriminate in favor of a 
domestic corporation against the business of a company organized 
in another State. 



134 NATIONAL BUSINESS CONGRESS 

The development of an industry may be greatly promoted by 
allowing the parent company to organize subsidiary companies 
either for the purpose of doing particular branches of its business 
or for the purpose of doing its business in a particular State or in a 
particular foreign country. A proper line may be drawn by pro- 
viding that no corporation engaged in interstate trade or commerce 
may own or hold stock in another company unless the parent com- 
pany owns all of the stock of the subsidiary company except the 
minimum amount necessary to qualify incorporators and directors 
in the State or foreign country where the subsidiary company is 
organized or proposes to do business. To this provision may be 
added the requirement that a majority of the directors of the sub- 
sidiary companies must be directors in the parent company, and 
that the identity of the subsidiary companies as a part of the parent 
company must be made a matter of public record. 

PROHIBITION OF INTERLOCKING DIRECTORATES. 

Another means of checking the concentrated control of indus- 
tries is the prohibition of interlocking directors in companies which 
have business relations with each other of a character w T hich ought 
to call for antagonistic or at least independent judgment. 

The control of banking and transportation ought to be sepa- 
rated as far as possible from the control of industrial enterprises, 
the success of which must be dependent on them for fair and equal 
treatment in the matter of transportation and loans. The principle 
of this separation has been recognized in the "commodity clause" 
of the Act of June 29, 1906, which prohibits the transportation by 
the railroads of the products of industries owned by them. This 
principle ought to be extended to prohibit directors and officers of 
railroads from being directors and officers of industrial companies 
which are or may be customers for transportation. 

The necessity for a similar separation of the direction of bank- 
ing and industry is shown in the attacks upon that indefinable thing 
called the "Money Trust." 

THE MONEY TRUST. 

The argument against trusts is very apt to degenerate into a 
heated tirade against the "Money Trust." The bankers are in 
popular imagination the men responsible for all the evils in trade 
and commerce to which other mortals are subject. The men who 



NATIONAL BUSINESS CONGRESS 135 

compose the "Money Trust'' are the men who are entrusted with 
the loaning and investing of the savings of the people. So far as 
they can the people entrust the loaning and investing of their sav- 
ings to the men who do not lose it or steal it. The custodians of 
the savings of the people always have had and always will have 
all the power that the "Money Trust" is now accused of exercising. 
There never has been and never will be any escape from their in- 
dustrial and commercial power unless the government takes, from 
the people who economize and save the right to select the agents 
and custodians of their funds. 

Their power and influence has been increased by the super- 
vision to which their control of the funds has been subjected. 
Supervision increases the size of the strong financial institutions 
and eliminates the weak ones. This supervision has been directed 
primarily to preventing the managers of financial institutions from 
stealing or losing the funds entrusted to their care. It ought to 
be extended to preventing their using them to promote and develop 
industries in which they are interested and hinder and destroy 
their rivals. 

The functions of bankers and the functions of merchants and 
manufacturers ought to be kept separate as far as possible. The 
most efficient method of maintaining this separation of functions is 
to provide that no loans shall be made directly or indirectly by any 
National Bank to any officer or director. The funds of the banks 
should be always available to customers who borrow on the merit 
of their security and not to insiders who borrow on the basis of 
their influence. 

CONCLUSION. 

We should be much nearer a solution of the real evils of our 
industrial development if Congress would first take as the foun- 
dation of its Anti-Trust legislation the protection of the rights of 
life, liberty and property with such supplemental definitions of acts 
injurious to trade or commerce as the conditions of modern indus- 
try make necessary or desirable, and then provide the machinery for 
its enforcement. 

Mr. President and Gentlemen : I have drafted and printed at 
the end of this pamphlet what I have called a Federal Anti-Trust 
Act. I am not conceited enough to suppose, even from my point 
of view, that I have arrived at the final word of wisdom in regard 






136 NATIONAL BUSINESS CONGRESS 

to the terms of that law, but I do believe that the broad lines upon 
which it is drawn would furnish a very much better foundation for 
sound and sensible legislation on the subject than the present recom- 
mendations from labor and capital. If it is not asking too much 
of your time and patience, I should be glad to have every business 
man read that proposed law, even if he does not spend any time 
reading the expression of my opinion as to the method by which 
I arrived at it ; and I shall only hope that, as a return for the great 
attention and courtesy that has been paid to me here, the work I 
have done will be of some value to the deliberations of this organi- 
zation. (Applause.) 

PROPOSED FEDERAL ANTI-TRUST LAW. 

An Act to Promote Trade and Commerce. 



By Mr. Pavey. 



Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled. 

Section 1. All organizations, associations, combinations and 
agreements in matters of trade and commerce between the states 
and territories of the United States and the District of Columbia 
and with foreign nations, the purpose and effect of which are to 
increase the wages and improve the conditions of employment of 
labor are lawful, unless they violate rights of life, liberty and 
property. 

Sec. 2. All organizations, associations, combinations and 
agreements in matters of trade and commerce between the states 
and territories of the United States and the District of Columbia 
and with foreign nations, the purpose and effect of which are to 
regulate competition, improve the conditions of business and in- 
crease the profits of capital, are lawful unless they violate rights 
of life, liberty or property or injure trade or commerce. 

Sec. 3. Every act and thing prohibited by this section, shall 
be deemed an injury to trade or commerce between the states and 
territories of the United States and the District of Columbia and 
with foreign nations within the meaning of this act. 

(a) After the expiration of one year from the passage of this 
act, no corporation, joint stock association or partnership engaged 



NATIONAL BUSINESS CONGRESS 137 

in trade or commerce between the several states and territories of 
the United States and the District of Columbia or with foreign 
nations shall own or hold stock or shares in any other corporation, 
joint stock association or partnership, engaged in such trade or 
commerce, except that any such corporation, joint stock association 
or partnership may acquire or organize a subsidiary corporation, 
joint stock association or partnership in any state or territory of the 
United States or the District of Columbia or any foreign country in 
order to avoid a conflict of laws or escape double taxation, or have 
the right to do business or acquire property within such state or 
territory, District of Columbia or foreign country; provided that 
all the stock or shares of the subsidiary corporation, joint stock 
association or partnership, except so much as may be required by 
the law of the state or territory or foreign country where such 
subsidiary company is organized to qualify directors and officers, 
shall be owned and held by the parent company, joint stock associa- 
tion or partnership and a majority of the directors of the subsidiary 
company shall be directors of the parent company, and provided, 
further, that every such parent company shall file a statement in the 
office of the Bureau of Corporations, in the Department of Com- 
merce and Labor at Washington,' stating in detail, the reasons why 
such subsidiary company has been acquired or organized ; the names 
of the persons holding stock or shares in such subsidiary company, 
and the amounts held by each ; together with the names of the 
directors of the parent company and of the subsidiary company ; 
and, provided further, that the names of the parent company and 
the subsidiary company shall appear on all letter heads, bill heads 
and invoices of both companies. 

(b) After the expiration of one year from the passage of this 
act, no person who is an officer or director of any railway com- 
pany or other corporation, joint stock association or partnership 
which is engaged in business as a common carrier in trade and com- 
merce between the states and territories of the United States and 
the District of Columbia and with foreign nations, shall at the 
same time be an agent, manager, partner, officer or director of any 
industrial or commercial corporation, joint stock association or 
partnership engaged in such trade or commerce. 

(e) After the expiration of one year from the passage of this 
act, no person shall be at the same time an officer or director of 
more than one National Bank in any one city of the United States. 



138 NATIONAL BUSINESS CONGRESS 

No loans shall be made by any National Bank, directly or indirectly, 
to any officer or director of such bank. No National Bank shall 
purchase or acquire in any other manner than in payment of a debt, 
any securities in excess of 10% of the capital stock of the bank. 

(d) After the expiration of one year from the passage of this 
act, no corporation shall engage in trade or commerce between the 
states and territories of the United States and the District of 
Columbia and with foreign nations, if the shares of its capital stock, 
or any part thereof, are held in a voting trust. 

(e) After the expiration of one year from the passage of this 
act, no corporation shall engage in trade or commerce between 
the states and territories of the United States and the District of 
Columbia and with foreign nations, if the stockholders are not en- 
titled at each election of directors to as many cumulative votes for 
one or more directors of the corporation as equals the number of 
shares held by them multiplied by the number of directors to be 
elected. 

(/) After the expiration of one year from the passage of this 
act, no corporation engaged in trade or commerce between the 
states and territories of the United States and the District of 
Columbia and with foreign nations, shall have in its business within 
the United States the same clerical organization, keep the same 
office or offices, retain or employ the same agent or agents for the 
purchase of its materials or the sale of its products or have the 
same officers or directors as any other corporation engaged in whole 
or in part in the same business. 

(g) After the expiration of one year from the passage of this 
act, no corporation engaged in trade or commerce between the 
states and territories of the United States and the District of 
Columbia, and with foreign nations, shall do business, directly or 
indirectly, under any other name than its own corporate name or 
the name of a subsidiary controlled by it, and the products of the 
subsidiary corporation, which are sold in the United States and bear 
the name of the subsidiary company, shall also bear a statement 
indicating the fact of such control. 

Sec. 4. Every person who, alone or in combination with 
others, does or causes to be done, any act or thing in matters of 
trade or commerce between the states and territories of the United 
States and the District of Columbia, and with foreign nations, 
which violates any rights of life, liberty or property, or injures 



NATIONAL BUSINESS CONGRESS 139 

trade or commerce, or who does or causes to be done any act or 
thing prohibited by this act, shall be deemed guilty of a misde- 
meanor, and on conviction thereof, shall be punished by a fine not 
exceeding five thousand dollars or by imprisonment, not exceeding 
one year, or by both said punishments in the discretion of the court. 

Sec. 5. The several circuit courts of the United States are 
hereby invested with jurisdiction to prevent and restrain violations 
of this act ; and it shall be the duty of the several district attorneys 
of the United States, in their respective districts, under the direc- 
tion of the Attorney General, to institute proceedings in equity to 
prevent and restrain such violations. Any one or more persons 
may institute proceedings in equity to prevent and restrain such 
violations. -Such proceedings may be by way of petition, setting 
forth the cause and praying that such violation shall be enjoined or 
otherwise prohibited. When the parties complained of shall have 
been duly notified of such petition, the court shall proceed as soon 
as may be to the hearing and determination of the case; and pend- 
ing such petition, and before a final decree, the court may, at any 
time, make such temporary restraining order or prohibition as shall 
be deemed just in the premises. 

Sec. 6. Whenever it shall appear to the court before which 
the proceedings under Section 5 of this act may be pending, that the 
ends of justice require that other parties should be brought before 
the court, the court may cause them to be summoned, whether they 
reside in the district in which the court is held or not ; and sub- 
pcenas to that end may be served in any district by the marshal 
thereof. 

Sec. 7. Any person who shall be injured in his "business or 
property by any other person by reason of anything forbidden or 
declared to be unlawful by this act, may sue therefor in any cir- 
cuit court of the United States in the district in which the defend- 
ant resides or is found, without respect to the amount in contro- 
versy, and shall recover three-fold the damages by him sustained 
and the costs of the suit, including a reasonable attorney's fee. 

Sec. 8. Whenever in any civil or criminal suit or proceeding 
brought by the United States under the provisions of this Act, a 
final judgment or decree shall have been rendered to the effect that 
any person has done, or caused to be done, any act or thing in viola- 
tion of the provisions of this Act, the existence of such act or thing 
shall, to the full extent to which the issues of fact or law were liti- 



140 NATIONAL BUSINESS CONGRESS 

gated, and to the full extent to which such judgment or decree would 
constitute in any other proceeding an estoppel as between the United 
States and such person, constitute as against such person conclusive 
evidence of the same facts and be conclusive as to the same issues of 
law in favor of any other party in any other proceeding brought 
under the provisions of this Act. 

Sec. 9. In any civil proceeding begun pursuant to the pro- 
visions of this Act by the United States in which a judgment or 
decree, interlocutory or final, shall have been entered to the effect 
that any defendant has done, or caused to be done, any act or thing 
prohibited by this Act, any person claiming to have been injured by 
any such act or thing, shall be admitted on intervening petition to 
the suit to establish such injury and the damages resulting there- 
from, and may have judgment and execution therefor, or any other 
relief to the same extent as if an independent suit had been brought 
by such person pursuant to the provisions of this Act. Such inter- 
vening petition, or independent suit, shall not be barred by lapse of 
time if begun within one year after the entry of a final decree or 
judgment, either in a civil or criminal proceeding brought by the 
Government establishing the violation of this Act by any defendant. 

Sec. 10. The word "person" or "persons" wherever used in 
this Act, shall be deemed to include corporations and associations, 
existing under or authorized by the laws of either the United States 
or the laws of any State or Territory or the District of Columbia 
or any foreign country. 

The Chairman : Gentlemen, the paper by Mr. Pavey is now 
open for discussion. We will be glad to hear any remarks. 

Mr. Hoole (of Indianapolis) : The gentleman who has just 
addressed us on the Sherman Law said, as I understood it, that 
any agreement with a competitor on trade or matters in trade would 
violate the law. In connection with the discussion of this law, and 
the various heated arguments that have been carried on upon this 
subject, little has been said, as far as I could learn, in regard to 
associations of manufacturers, of which there are in this country 
in the neighborhood of 1,200, except where those associations have 
gone into pools, held intact by process of fine, or some other method 
of intimidation. Now, there are a great many hundred, a great 
many thousand manufacturers in this country who desire to be in- 
dependent proprietors of their own plant and property. It does 



NATIONAL BUSINESS CONGRESS 141 

not make any difference to them whether they do a business of 
$50,000.00 a year or $1,000,000.00 a year. They desire to run their 
own property, own it. It has been recognized, however, by those 
individual proprietors that there are certain features in the trade 
that can be dealt with by means of manufacturers' associations. 

I happen to have been personally connected in various ways 
with twenty-five such associations, and in the last three years 25 
per cent of the discussions in those association meetings has been 
around the subject of what we can do that is within the law. Now, 
I am speaking merely to offer suggestions or as a subject for dis- 
cussion possibly tomorrow, or by resolution in this connection, upon 
the subject of what the manufacturers' associations can do right- 
fully, what they can agree upon, and what they cannot agree upon. 
I have here — I am not going to speak very long — a letter that I 
wrote which happens to hit the subject very closely. It covers, in 
the headings, those things which all those twenty-five associations, 
the members and the attorneys they retain, said could be done under 
the present law. If construction were to be carried to the point 
the last speaker stated, none of these things, or hardly any of them, 
could be done. 

The first is the collections and credits ; maintenance of a col- 
lection bureau and the maintenance of a rating broker. In this 
city there are four or five associations of furniture manufacturers 
working out of one office who have carried on for a period of six 
or seven years a collective effort for getting money from poor ac- 
counts. 

The next matter, of sales, prices. There are associations now 
that have lists of prices that are recommended — not agreed upon, 
but recommended. Also the associations get together and not agree 
but discuss as to which price should be given to an individual cus- 
tomer, such as jobber's, retailer's or consumer's price. There is 
also the matter of letting each other know what prices are given 
in the trade, that is, by reporting to a central office what prices they 
are giving to different customers. 

As a matter of purchasing material, the listing of prices on 
material. 

The matter of uniform accounting, of agreeing to all carry on 
their accounts under the same uniform scheme. 



142 NATIONAL BUSINESS CONGRESS 

Further, to deliver to the central office the cost of goods. One 
organization each month has delivered to its office from some hun- 
dred members the costs on the articles turned out in the previous 
month. 

There is the matter of freights, insurance; the matter of treat- 
ment of the sales policy. There are numerous matters which can 
be dealt with in a co-operative way, and this is an attempt on the 
part of , the small proprietor to combine with his small proprietor 
in securing the advantages of a large combination. Everybody rec- 
ognizes the economic advantage of a large combination. These 
organizations or these associations are an attempt to give the smaller 
companies the advantages of the larger organizations. 

These association efforts are honest, well-meant, and they are 
actuated with a desire to be within the law, yet if the present agita- 
tion, as it has been interpreted by some of the speakers at this meet- 
ing — if the agitation is carried on it may go to the point where 
they will say that no competitor shall meet with his competitors in 
any kind of a meeting, even at a dinner, such as the Gary dinner, 
which was criticised recently at Washington. The attempts are 
the attempts made by the association and, as seen by most of the 
manufacturers, are to eliminate ignorant competition. No one wants 
to eliminate wise competition or co-operative competition, which 
produces better articles for less money; but to eliminate unwise 
competition and to eliminate the abuses in the trade and to dis- 
seminate knowledge. 

These organizations are many. There are probably represen- 
tatives from four or five in this room, and they cover, even taking 
into consideration the big business of the country, a larger capi- 
talization, a larger output, a larger investment than a total of all the 
trusts, so-called, and have more to do with the life of the country 
and the life of the trade in their various lines than perhaps do 
the trusts, so-called. 

The point I am coming to : I would like to suggest that some 
representatives of other associations here endeavor to bring out 
in some definite form the statement of their belief as to what asso- 
ciations can do to formulate that into such a state tb^t it can be 
presented in the records of this meeting and, through the com- 
mittee, to Washington, in the proper manner. 

I thank you, gentlemen. 



NATIONAL BUSINESS CONGRESS 143 

Mr. Bruce: This convention will have to give expression, 
in a clear-cut manner, on these economic questions, in a clear-cut 
resolution. I desire also to call your attention to some of the in- 
vestigations and studies that have been made on this question. 
Some ten years ago, there was called a convention or congress in 
this city for the purpose of offering some solution on the trust 
problem. The congress or convention at that time was perhaps 
one of the most important gatherings ever called in this city to 
solve a great economic problem. There came to this city men in 
all the activities of life, the important activities in life, and there 
came out in that discussion three distinctive propositions. First, 
there were those who held the trusts were vicious ; there were 
those who took the other extreme and said, Let them alone ; and 
there came the third school that held that publicity was the remedy. 
That meeting was held ten years ago, when a solution or a study 
of the proposition was entirely new. Eight years later there was 
again called a conference on the same subject, and there came 
from all parts of the country men who had given eight years' 
study, who had come with eight years' experience, and now watch 
the change. There was not one man who said : "Smash the 
trusts;" there was not one man who had given any thought or 
study who said : "Let them alone ;" nor was there anyone who said 
that publicity was the solution, but the students and the economists, 
the men who had given the subject thought, time, attention and 
study were all of one mind in saying that proper regulation was its 
only solution. That there were combinations and agreements which 
were beneficial to the public, and that there were those that were 
harmful ; and I hold that that solution must be applied. Sherman 
Law or no Sherman Law, the conclusion will have to be that there 
are agreements upon prices and grades and commodities that are 
beneficial, not only to the producer, who has a right to a proper 
earning upon his investment, who has a right to be protected, but 
it will also be beneficial to the consumer. 

And so I hold to the conclusion that there will have to be regu- 
lation, and that regulation cannot be state regulation, but must be 
federal regulation, and that there must be established some agency — 
call it industrial commission, a court of commerce — that will have 
to determine upon agreements and combinations that are beneficial 
and upon agreements and combinations that are harmful. I hold 



144 NATIONAL BUSINESS CONGRESS 

that this organization, this important gathering, should come to the 
announcement that regulation must be the proper solution. 

Tomorrow resolutions will be offered here, and those resolu- 
tions ought to be upon progressive lines, accepting the best thought 
of the day, and then send them out to the country as the expres- 
sion of progressive and advanced manufacturers and business men. 
(Applause.) 

The Chairman : The meeting is now open for discussion of 
the general propositions on all the papers that have been read and, 
at the same time, anticipating the papers to be read tomorrow. The 
Resolutions Committee will be very glad to have a free and frank 
expression of opinion. It may be of some value to them and help 
them to formulate the resolutions in correspondence to the ideas 
of the Congress. 

Mr. Bannister (of Indiana) : Mr. Chairman and Gentlemen : 
I am a manufacturer of over twenty-seven years' experience, and I 
am very much interested in the subject of the last paper, perhaps 
in a different form as it might apply to organizations. 

There was a time in our history when the human family was 
the complete organization of government, commerce and trade. 
The father's and mother's idea and word was law ; the son cut the 
trees and the daughters spun the yarn to make the clothing. That 
was common, and the two combined, or the three combined made 
the labor organizations. At such time there was no such thing as 
strikes, lock-outs, combinations in restraint of trade. There could 
not be such things. 

We have had for a long, long time efforts to restrain combina- 
tions. As I said, I am a manufacturer; I am also a Republican, 
always have been, and I have a definition in my own mind of the 
difference between a Republican and a Democrat: the Republican 
is the fellow who finds fault with that which is wrong ; the Demo- 
crat also finds fault with that which is wrong, and up to that point 
they are both alike, but the Republican always tries to provide a 
remedy; the Democrat simply finds fault. 

What is the remedy for all of this we have been talking about ? 
Is competition the life of trade? No, no. My dictionary tells me 
that competition means strife for the same object, and it goes on 
and says: 'Tights, battles." And you could add something else to 



NATIONAL BUSINESS CONGRESS 145 

it: Competition, strife for the same object means battle, fight to 
death. So that unrestrained competition means the death of trade. 

How are we going to remedy it? Not by continuing compe- 
tition. I can take you down on Fourth Avenue in the city of New 
York, as I have been there on an August afternoon, and see little 
girls fourteen or fifteen years old — Sunday afternoon, at that — on 
the second or third or fourth floor, running a sewing machine, mak- 
ing shirts at a starvation wage so that you and I or anybody else 
can buy them at fifty cents apiece. That is one branch of the com- 
petition; they start where the daughters spun the yarn. We have 
in Chicago one branch of the family and another in New York, and 
they go back and forth on the competitive idea until there is noth- 
ing for them to do. The manufacturer cannot do anything else ex- 
cept to meet the New York competition ; the New York man is not 
to blame, because he cannot do anything but meet the Chicago com- 
petition. Labor is ground down by this competition until there is 
nothing for them to do but strike. You had a good example of it 
in Chicago a short time ago among your clothiers. There were some 
battles, and I think eighteen deaths were the result. I maintain 
that the remedy for all this is a national law that will not at- 
tempt to prevent organization, but that will absolutely require people 
of a like interest to come together into an organization and become 
bureaus of information that will show their right to live; that will 
show that they pay their laborers a reasonable price ; that will show 
to the producer that there is a profit in the business, and show next 
to the customer and to the public finally. The producer must know, 
in order to be able to continue in the business, that he is making 
money. The consumer must know, because he is the public, and he 
must be willing to pay the laborer his hire, and the public generally 
that invest their money in those organizations, must know that they 
are safely invested. I do hope that this Congress, before it ad- 
journs, will come to some distinct and positive recommendation. I 
am not a lawyer, and you can confuse me very quickly upon the law 
points, but the object to be reached is that which will enable all 
trade, all commerce in this country to be conducted at a profit and 
to pay its labor a worthy hire. 

The chair that I have hold of with my hand has nothing what- 
ever in it except labor, absolutely nothing. The clothes that are 
upon your backs have nothing in them that makes them cost any- 
thing except labor. When God created the earth and man He gave 



146 NATIONAL BUSINESS CONGRESS 



him everything that was on it and in it and said, Go out and utilize 
it. The only thing that made it cost anything, your coat, was the 
labor that had been put into it up to that point, and the only thing 
that made it cost anything to the man. There is absolutely no such 
thing as cost of raw material. The ore costs nothing in the ground ; 
the coal costs nothing in the ground. The wood in the trees 
costs nothing on the ground. There was no charge made by 
the Creator when He gave them to mankind, and the only thing 
that has made them cost anything is the labor that we have put in 
them. Now, then, if we are going to continue — and we are all 
laborers — to live and to live right, we are going to be obliged some- 
times to share equally and rightfully with each other as we go along, 
and that can be done, in my opinion, by a law that requires every 
interest of a like nature to form itself into an organization which 
will be able to show whatever officer or executive committee or any- 
thing else you may put in it, that it has the right to live. 

Gentlemen, I thank you. (Applause.) 

Mr. Stackhouse (of Springfield, Ohio) : Mr. Chairman and 
Gentlemen of the National Business Congress: In my judgment, 
it has been a splendid thing, particularly to all this great organiza- 
tion, to get together here this week, the representatives of so many 
commercial organizations and so many various lines of business, 
for the purpose of indulging in a discussion absolutely dispassion- 
ate, as well as equally non-political, upon some of the most important 
questions of the day that have been selected with most rare dis- 
crimination, in my judgment, by this organization, under whose 
auspices this meeting is beng held. And while no one can ques- 
tion the vast importance of the various subjects that we are invited 
to consider here today, nevertheless, out of many of the half dozen 
problems that are submitted at any time for the consideration of 
thoughtful men, existing conditions at that particular time of neces- 
sity makes one of those problems of more or less paramount inter- 
est. That, I submit, is the case today, for, owing to the present 
exigencies of our political and commercial situation, in my judg- 
ment, the industrial situation is paramount in importance even to 
the half dozen other propositions so commendably and intelligibly 
submitted for your consideration by this organization. And, pro- 
ceeding on that premise, I also submit that, inasmuch as all of us 
who are in industry, whether on a large or small scale, are vitally 



NATIONAL BUSINESS CONGRESS 147 

interested in all legislation that affects industry, for the reason that 
anything, whether legislative in character or otherwise, that affects 
the principal industrial organizations of this country, of necessity 
affects correspondingly all industry. 

Hence, it is particularly appropriate that, regardless of our re- 
spective lines of business, we devote our most serious thought 
to the consideration of this particular problem at this time. It is 
of even more importance that we do this, for the reason that the 
general serious apprehension existing everywhere with reference to 
our vast commercial interests is principally due, or at least in a 
large part due, to the delivery of national affairs to demagogues of 
various kinds, whether political, labor or otherwise, and to more or 
less theoretical and professional reformers, political opportunities 
in their political efforts to correct certain defects. All that affects 
our industrial life, and it is especially appropriate that this subject 
be considered in this city and in this country. 

We were told here by one of the distinguished speakers yester- 
day, and correctly so, that the foreign commerce of this country, 
including our exports and imports, exceeded the tremendous sum 
of three and one-half billion dollars annually, while our internal 
commerce has reached incredible and almost incomputable figures. 
As an illustration : It was approximately estimated here yesterday 
that the total commerce of this country amounted to thirty billion 
dollars, a sum vastly beyond the comprehension of every one of us. 
Our enormous railroad systems comprise a mileage of 142,000 miles, 
so that you see our commercial interests not only are decidedly 
substantial, but it is our commendable boast that our country today 
occupies a prominent position in the entire commercial world, which 
at this time is seriously threatened by certain persons to whom I 
have just alluded. 

During its early history, when our population was scattered 
and not very numerous, it was chiefly engaged in agricultural pur- 
suits, to which later on was added the manufacturing business, and 
then the solution of the transportation problem by the building and 
operating of our vast railroad systems. 

Immediately after the Civil War and its general devastating 
effects Congress resumed its sway, and our people, constantly and 
largely reinforced by a desirable emigration from the British Isles 
and Central and Northern Europe, again turned their attention to 



148 NATIONAL BUSINESS CONGRESS 

the peaceful pursuits of industry, and also by way of stimulating 
influential energy and mechanical ingenuity in addition to build- 
ing up a substantial foreign trade. Gradually, however, as our pop- 
ulation increased, due not only to natural laws, but to this vast 
emigration to which I have referred, our commercial system corres- 
pondingly increased in volume, and in its tremendous ramifications 
in the mad strife for business, competition became so keen — and we 
hear a great deal of competition nowadays, resulting from the com- 
petitive system — competition became so keen that operatives in most 
of our factories and elsewhere were vastly underpaid. Railroads 
became engaged in the issuing of discriminatory rates and granting 
rebates, thereby seriously injuring and impairing the welfare of 
many communities and many shippers ; while the manufacturer like- 
wise pursued the same ruinous competitive policy of selling his prod- 
ucts around, or regardless of, cost, and at the same time, or, to be 
more specific, in 1890, owing to a general apprehension that certain 
large corporations or combinations of capital would be effected for 
the purpose of obtaining a monopoly in our various lines of business 
among rivals in those lines the Sherman Act was adopted, absolutely 
proscribing such mergers, and providing severe penalties for its' vio- 
lation. Now, regardless of how much-gifted attorneys may see fit 
to indulge in a technical discussion of either the spirit or whole of 
the Sherman Act, its general character is absolute prohibition of all 
industrial combinations. That is the temper of the law, both in 
spirit and letter. Consequently, with our multitudinous concerns in 
the various lines constituting our industries being absolutely pro- 
hibited from either decreasing their numbers or increasing their 
effectiveness in the way of indulging in these combinations, the Sher- 
man Act absolutely prohibited it, and with the result that I have 
indicated, that during the last decade of the last century general ap- 
prehension and the most disastrous situation prevailed generally in 
this country among all lines constituting our industrial system — and 
gentlemen, that not only includes capital, the employer, but the rail- 
roads and labor of all kinds. What is the result? 

During the first decade of the twentieth century, and more or 
less in contravention of the provisions of the Sherman Act, com- 
binations were made and indulged in as a matter of interest or ex- 
pediency. The railroads, for instance, adopted the pooling system 
and provided through rates and routes for both passenger and 
freight, while numerous industrial combinations engaged rival lines 



NATIONAL BUSINESS CONGRESS 149 

which were affected. At the same time labor organizations were 
rapidly formed for the most commendable purposes. I wish to state 
right here that during the early years of their existence they accom- 
plished splendid results in the way of inducing manufacturers to 
provide safe and sanitary surroundings in which they should be em- 
ployed. They were also later on largely instrumental in the adoption 
of laws in our various states, covering the installation of safety 
devices for the prevention of accidents ; and, in addition to that, they 
vigorously endeavored to induce employers to pay larger and more 
stable wages, which was perfectly proper, in my judgment. 

But, on the other hand, the underlying idea which prompted 
these concerns to effect these combinations more or less illegally, 
as they were, was for the purpose of obtaining some economical 
results in the management of their organizations, besides increas- 
ing their efficiency, and being able to sell their product at a profit, but 
at moderate prices. That was the underlying idea, regardless of 
how it may have worked out in certain cases. And, gentlemen, we 
must remember that stability both of prices and of labor is one of 
the most important elements involved in our commercial system ; but 
just as the permanent success of labor is dependent on the stability 
of living and reasonable wages, so, gentlemen, is the success of the 
commercial end of industry absolutely contingent upon the stability 
of moderate prices. 

Now, as the result of these various combinations that were 
effected, both by the commercial end of industry and labor, what 
was the result? During the first decade of this century we in- 
creased our internal commerce, as I have stated, to almost incredible 
figures, and our foreign commerce, including both imports and ex- 
ports, reached the enormous sum of three and a half billion dollars 
a year, while, on the other hand, the American workman received 
higher wages than he ever had before or than were paid elsewhere, 
and general prosperity reigned throughout the land. Then, unfortu- 
nately, gentlemen, and owing to the inherent cupidity of human na- 
ture, certain of our industrial combinations to which I have referred 
began to indulge in certain reprehensible methods for the obvious 
purpose of obtaining a monopoly in restraint of trade, and, on the 
other hand, by strangling competition or destroying it, which it did 
sometimes by selling at moderate prices. And, on the other hand, 
labor unions likewise, apparently having become unsettled by their 



150 NATIONAL BUSINESS CONGRESS 

unprecedented power and the remarkable prosperity of their mem- 
bers, indulged in some very reprehensible methods, such as, for in- 
stance, in unreasonable demands for further advance in wages, for 
the recognition of the union to such an extent that without its ap- 
proval none of the proprietors of industry could make effective any 
economical policy whatsoever in the management of their business. 
In addition, restricting output and resorting to criminal and cowardly 
boycott. 

At the same time a most vigorous warfare was started by or- 
ganized labor throughout the country, which became exceedingly 
hostile against unorganized labor, while certain labor leaders con- 
nived at and promoted more or less crimes, some of which culmi- 
nated in murder, with some of which we are more or less familiar, 
owing to recent exposures. So now, gentlemen, we have seen in a 
brief way the disastrous results incidental to unlimited competition 
up to the close of the Nineteenth Century. We have also seen the 
equally disastrous results in other respects incidental to unre- 
stricted monopoly in certain lines ; and we are now confronted 
with the proposition of how to solve the perplexing problem — and 
perplexing it certainly is to all of us. 

Now, in connection with this problem, it must be borne in 
mind, particularly by these gentlemen who are advocating the resur- 
rection of the old competition system to Congress, that when you 
advocate that, in order to be consistent and fair, you must apply 
that same ruinous policy to all the elements constituting our com- 
merce, the principal elements being capital and labor, because it must 
be patent, manifestly patent, to any one that you cannot success- 
fully apply the competitive system to the commercial end of indus- 
try only, while maintaining high wages on a high basis. 

Another thing: if industrial combinations are wrong theoreti- 
cally, it would seem to be that labor combinations are also wrong 
in principle, as both affect prices. 

In my opinion, another very important contributory element, 
that is contributory to the present existing distressing situation in 
our industrial system, is the apparently fixed and destructive policy 
of our national administration, in attempting to solve a perplexing 
problem solely in each case by litigation — instead of attempting to 
specifically advise industry as to what it can properly do within the 
law in the successful conducting of its business, or at least in co- 
operating with industry in both a friendly and public manner in 



NATIONAL BUSINESS CONGRESS 151 

ascertaining what it can do, or in assisting it in obtaining proper 
and specific legislation; legislation so specific in its provisions, that 
it would be easily understood, so that in that event, its violation 
would be absolutely inexcusable. And, gentlemen, in this connec- 
tion it must be remembered, at least in my opinion, that the present 
drastic measures that are being applied to industry indiscrimi- 
nately, in order to solve this problem, are bound to be as unsatis- 
factory in their effects as would be the case of a surgeon in attempt- 
ing to correct some defect in the human system by amputating his 
patient's head. 

Gentlemen, as a solution of this problem, let me again remind 
you of the self-evident fact that capital and labor constitute the two 
principal component parts of industry. Without the existence of 
either of these two elements, there can be no industry. And with- 
out their friendly co-operation, there can be no prosperity per- 
manently. 

And, that being the case, gentlemen, in my judgment, it be- 
comes absolutely necessary that all labor, whether organized or not 
— labor's interest might be seriously jeopardized by this wholesale 
attack on industry, this ill-advised attack on our commercial sys- 
tem, as is the commercial end of industry, as both are equally in- 
volved in our commercial system. Now, if that conclusion is true, 
it then seems to me absolutely necessary that the commercial end 
of industry invite the rank and file of all labor — and with reference 
to organized labor, in my opinion, the rank and file of organized 
labor are riot criminals nor, in my judgment, are they going to per- 
mit themselves to be further led by some criminal leaders. 

Hence, I make this statement, that we appeal to the rank and 
file of all labor to join in an honest endeavor to induce the proper 
governmental authorities, both national and state, to co-operate 
with us towards stimulating a general resumption of industry in 
the way of the legal substitution for the present obsolete, restrictive 
policy under which we are obliged to operate without violation of 
the law; for equitable legislation that will discriminate against no 
class ; that will be constructive in character ; that will be specific in 
its provisions, and so comprehensive in its scope as to afford the 
necessary facilities for the successful conducting of the country's 
business in its constantly increasing volume, and in this way I sub- 
mit that this country will be able even to excel all past records 



152 NATIONAL BUSINESS CONGRESS 

which have given it its present prestige and pre-eminent position in 
the entire commercial world, and in this way can we rest assured, 
gentlemen, that the American Eagle will soar to the zenith of com- 
mercial prosperity and power. 

I thank you. (Applause.) 

Mr. Wallis: I just want to say a word on this labor proposi- 
tion. In all of the papers of nearly all of the speakers, my own in- 
cluded, we have referred to organized labor. Now, I think that 
this Association, in its wisdom, with reference to any resolution 
touching upon the labor situation, should bear in mind that organized 
labor as it is known today, does not represent labor. It represents 
possibly ten per cent. And it is the duty, as I undersand it, of the 
business man of today to draw unto him the ninety per cent; and 
if in the past employers of labor in this country had not been 
cowardly in their attitude toward labor, they would have had ninety 
per cent with them. 

You can go back over the history of the strikes that have taker, 
place in this country, and men have been willing to come in to have 
an opportunity to improve their condition, and you have given them 
that opportunity until you settled with the labor union. Then 
those men went out in the street. What would they do, or what 
would you or I or anybody else do under similar circumstances? 
You would go and join some sort of an organization for protection. 

If the business men of this country will, in this, session, or 
some session following this, promulgate a business policy for the 
protection of labor — not organized labor, but all labor — and build a 
fence strong enough so that when a man who does not belong to a 
labor organization feels he can lean up against it and the fence is 
not going to give way, he will be glad to come in with you, because 
the rank and file today realize that upon business prosperity hinges 
their prosperity; that if business does not prosper and they cannot 
be employed, they are at a disadvantage. But I think that we should 
make a clear cut distinction between organized labor and the rank 
and file. 

The Chairman: The floor is now open for any resolutions 
which may be ready to offer, to be referred to the Resolutions Com- 
mittee. 



NATIONAL BUSINESS CONGRESS 153 

Mr. Pavey: Mr. Chairman, at the suggestion of one or two 
men, I am asked to propose a resolution, that a committee of five 
be appointed for the purpose of consulting together for the purpose 
of forming an association, the objects of which will be similar to 
this; and before we adjourn, I offer that resolution: that the Chair- 
man appoint a committee of five, or it can be referred to the Com- 
mittee on Resolutions. 

The Chairman : The resolution is in relation to the appoint- 
ment of a committee of five, or at least for the Resolutions Com- 
mittee to appoint a committee of five, to bring about some plan of 
forming an Association which will embody all of the Associations 
in the form of a National Association, and making a business con- 
gress for carrying out the resolutions of the different congresses 
as they are made. In other words, to make a permanent National 
body. 

Mr. Pavey: In explanation of the resolution, the language 
is a little indefinite. The desire was to arrive at some permanent 
organization that would make other congresses effective in their 
work. 

Mr. Wallis: I quite agree with the idea of the necessity for 
such action, but isn't that properly a subject for our Resolutions 
Committee ? 

The Chairman : This is authorizing the Resolutions Com- 
mittee to formulate that plan, only. 

Mr. Wallis : Why not present the idea to them and let them 
formulate a resolution which would cover it? 

The Chairman : That is the resolution. 

Mr. Wallis: I thought the resolution was for the appoint- 
ment of a committee of five. 

The Chairman : For them to do that if they like, or not. 

Mr. Pavey: Perhaps I did not express myself very well. 
The suggestion was made that the chair appoint a committee of 
five, but it was also suggested that if this question be referred to 
the Committee on Resolutions, it would not be necessary to appoint 



154 NATIONAL BUSINESS CONGRESS 

a new committee, but to refer it to the Resolutions Committee, or a 
committee of five should work out some sort of a plan. 

Mr. Boothe : I would say that this matter is now under con- 
sideration by the Resolutions Committee. I would also request 
that anyone having resolutions, should present them before the clos- 
ing of this meeting. 

The Chairman : Are there any further resolutions to go 
before the Resolutions Committee? 

Mr. Wallis : I suggested, in my address yesterday, that we 
might possibly agree upon the recommendation on the monetary 
situation, concurring with the action of the bankers on legislation. 

The Chairman : I think it would be better for you to put 
that in the form of a resolution, or request to the Committee, and 
let it go right directly to them. 

Mr. Wallis: My only thought was that possibly we might 
now discuss it informally for the benefit of the Resolutions Com- 
mittee. 

On motion, duly seconded, the meeting adjourned until 
Wednesday, December 13, 1911, at the hour of 10:30 o'clock a. m. 



NATIONAL BUSINESS CONGRESS 



155 



FIFTH SESSION. 



Wednesday, December 13, 1911. 
10:30 o'clock A. M. 

The Chairman : The convention will please come to order. 
Gentlemen, the first address this morning is by Mr. Frederic A. 
Delano. Mr. Delano is unable to be with us, and Mr. Nye will 
read his speech. 

Mr. James W. Nye (of Illinois) : Mr. Chairman and Gentle- 
men : I know we all regret that Mr. Delano's views upon Trans- 
portation will miss the charm of his personality in presenting them. 
I will endeavor, and hope that in reading them, I may not obscure 
his mind. 

TRANSPORTATION. 



By Frederic A. Delano, President of the Wabash Railroad Co. 



As long as 300 years ago, Sir Francis Bacon had pointed out 
that the sources of wealth of any nation were : First, its pro- 
ductivity, in other words, the productive capacity of its natural re- 
sources; Second, the manufacture of raw materials into a form 
more useful to man ; Third, the vecture, or transportation, from the 
point where they were produced or manufactured to the point 
where they could be used. This statement may be tabulated for 
convenient reference, as follows : 



The Creation 
of Wealth. 



I. 

From the Productive- 
ness of Natural Re- 
sources. 

From the Manufacture 
or Adaptation of Raw 
Materials. 

From the Vecture or 
Transportation o f 
Raw and Manufac- 
tured Materials. 



From Tillage of the 
Soil. 

From Mines and Quar- 
ries. 

From Forests. 



156 NATIONAL BUSINESS CONGRESS 

This very simple and fundamental statement is worth bearing 
in mind. No nation can grow rich if it consumes more than it 
produces, and lavish expenditure — as economists have realized for a 
long time — is never an index of growing wealth. Some econo- 
mists, for example, have pointed out that in times of severe stress, 
following great wars or famines, the increase in the wealth of the 
nation has been much greater than in so-called a good times." 

Adam Smith, the father of modern political economy, writing 
150 years ago, pointed out that the world is divided as between 
productive and non-productive consumers, showing also how it was 
necessary in primitive times for every able bodied man and woman 
to aid in the production of wealth, whereas in the more civilized 
times only one individual in five, or six or seven, was a producer. 

It is my purpose in this paper to deal with Transportation as 
one of the fundamental means of wealth creation, and to illustrate 
its growth, its necessity, and its future possibilities. 

II. 
THE NATURE OF TRANSPORTATION SERVICE. 

Transportation is a service. It is intangible. Unlike other 
forms of produced wealth, while it adds to the value of a com- 
modity, it is not an entity which can be stored up or manufactured 
with regularity and sold at convenience. Transportation, in other 
words, is a service which can only be sold at the time it is re- 
quired. In many periods, and for long-continued periods, trans- 
portation capacity may be far in excess of the requirements, and yet, 
it cannot be manufactured if not wanted. The obvious result of 
this is that while there may be a great over-production of transpor- 
tation capacity, there never can be an actual over-production of 
transportation. 

III. 

There are three principal forms of transportation service, the 
importance of which so far exceeds that of all other forms that 
only they need be considered in a discussion of the question. These 
are: 

(a) Transportation by Water. 

(&) Transportation by Street or Highway. 

(c) Transportation by Rail. 



NATIONAL BUSINESS CONGRESS 



157 



This statement may be conveniently tabulated as follows : 



/ 



O 

i— i 

H 
< 

O 

Ph 
CO 

< 



By Water 



By Streets and 
Highways . . . 



Natural Water- 
ways 

A r t i fi c i a 1 
Waterways. 

By Animal- 
drawn Ve- 
hicles. 

By Motor- 
drawn Ve- 
hicles. 

Steam Rail- 



Ocean. 

Lakes. 

Rivers. 

Canals or 
n a 1 i z 
Rivers. 



Ca- 
e d 



By Railway 



^ 



ways. 

Electric 

ways. 



Rail- 



The development of each of these three methods has been very 
marked in recent years, and in no country more so than in the 
United States. We may safely lay down certain general conclu- 
sions in respect to these three methods of transportation. Each 
has its proper sphere and its peculiar function to perform in the life 
of the community, and while these may overlap one another to a 
limited extent, any marked distortion of them must be productive 
of an economic waste. 

Transportation by Water. To be economical, this mode of 
transportation requires the use of very large units. The 1,500-ton 
barge in canal and river transportation, the 12,000-ton boat in lake 
navigation, the 45,000-ton vessel in ocean navigation, are — it may 
be said — the "last word" on the subject. 

It is easily seen that this means of transportation is the least 
flexible. The size of the units required for economical operation 
and the cost of providing suitable docking facilities, bring this about. 

Transportation by Street or Highzuay. Under this head, we 
include animal-drawn and motor-driven vehicles. The three-horse 
dray, the five and seven-ton motor truck, are the latest develop- 
ments of this method. This is the most flexible means of transpor- 
tation. It adapts itself to any convenient size of unit ; but even the 



158 NATIONAL BUSINESS CONGRESS 



largest unit possible is decidedly smaller than those which can be 
most advantageously used in either of the other methods of trans- 
portation. 

Transportation by Rail. We include in this grouping, steam 
and electric traction on what are universally known as railways. In 
point of the size of economical units and in flexibility of distribu- 
tion, rail transportation plainly falls about midway between water 
and highway transportation. The greatest advances in rail trans- 
portation in this and other countries, have come since the adoption 
of a uniform gauge of track and a uniform type of car construction. 
The ability to overcome grades, pierce mountain ranges and cross 
streams, or the facility of reaching the factory, the receiving and 
shipping platform — have all contributed largely to its rapid develop- 
ment. The English, German and French railways have, to some 
extent, even greater flexibility than our own; but this is gained at 
the expense of using much smaller transportation units, the result 
being a net loss to the community as a whole. Speed and regularity 
are in favor of railway transportation, and have contributed to the 
development of high-class business. 

The Size of Units. If there is one thing proved more certainly 
than any other (and this applies to all methods of transportation), it 
is that the largest unit which can be conveniently used is invariably 
the most economical. Thus, in ocean traffic, the only thing which 
limits the size of vessels is the depth of water in our great harbors, 
the ability to maneuver very large vessels in contracted channels, 
and — last, but not least — a volume of business sufficient to load ves- 
sels without excessive delay. In the same way, on our steam rail- 
roads the only thing which is limiting the size of cars is the width 
and height of clearances, the safe maximum wheel loads, and volume 
of business sufficient to make the loading and unloading of cars pos- 
sible without too much loss of time. 

In passing, it may be said that in Rail transportation there are 
two units — the car unit and the train unit. In respect to both of 
these, all progress in the direction of increased efficiency has also 
been in the direction of constantly enlarged units. Furthermore, 
the constant increase in the wages of engine and trainmen has acted 
as an added spur towards the adoption of larger units. 

In respect to Street and Highway transportation, it is equally 
true that each increase in the size of the unit — where conditions 
favor it — effects an economy. Thus, the two-horse dray has gener- 



NATIONAL BUSINESS CONGRESS 159 

ally replaced the one-horse cart; the three-horse dray, in turn, has 
replaced the two-horse wagon; and now the large capacity motor 
truck bids fair to displace the horse-drawn vehicle — not wholly, but 
wherever the length of the haul and the volume of the business war- 
rant. 

IV. 

THE SEPARATE FUNCTIONS WHICH EACH MEANS OF 
TRANSPORTATION SHOULD PERFORM. 

It is sufficiently apparent from what has gone before, that each 
method of transportation has its own separate and peculiar field. 
While these three departments lie adjacent to each other, in the main 
they are entirely separate and distinct. None of them can usurp the 
functions or trespass upon the territory of the other to any great 
extent without entailing an economic loss. It is important that this 
should be clearly understood, and that neither prejudice nor senti- 
ment should be allowed to sway our judgment or influence action 
calculated to destroy the resultant benefits of such an understanding. 
We are dealing wholly with facts, and insofar as it is necessary to 
form opinions, there are ample facts on which to base them. It is 
my purpose to point out the respective fields which these methods 
of transportation must properly fill, and, judging from the history of 
the past, to formulate the limitations which may fairly be said to 
circumscribe them. 

IV-A. 

Beginning With Water Transportation. It is quite obvious 
that this must be divided under three general headings : 

Ocean Transportation. 

Lake Transportation. 

River or Canal Transportation. 

As pointed out in a report made by the Chief of Engineers of 
the United States, the cost per ton of lading capacity for a vessel in 
ocean service, is approximately $71.00. Measured in a similar 
way, the cost per ton of lading capacity for a lake vessel is $41.50; 
and the cost per ton of lading capacity for a canal or river vessel, 
$12.00. Because interest on the investment and Marine Insurance 
form an important item in the cost of transportation, and, therefore, 
in the rates charged, it is uneconomical to employ an ocean-going 



160 NATIONAL BUSINESS CONGRESS 



craft in Lake or in River navigation, or to employ a Lake vessel in 
River or Canal navigation. The larger the unit, the greater its dis- 
ability for the economical distribution of freight. Thus, ocean- 
going craft discharge their cargoes at New York, although many 
of them could safely navigate the Hudson and distribute their 
cargoes. Lake boats of the older and smaller types coming into 
the Chicago River used to call at various docks to receive and dis- 
tribute their loads. The larger the unit, the less advantageous does 
this become, and in connection with modern lake vessels, we see 
lighters employed to collect and distribute the cargo. 

The cost of water transportation is not generally known. A 
considerable share of it is borne out of general taxes in the form 
of governmental expenditures for the maintenance of Harbors, 
Dock facilities, River improvement work, Lighthouse service, Life- 
saving Stations, the exemption of taxes on vessel tonnage, Ship 
Subsidies, etc. So far as natural waterways are used, especially 
where the maintenance and improvement expense is small, as com- 
pared with the tonnage, the cost is very low. 

The economy resulting from the use of large units is particu- 
larly great in the handling of heavy and bulky commodities moving 
in large quantities. Thus, coal, iron ore, grain, barrelled freights, 
baled freight, such as cotton, wool and cloth — can all be handled 
with modern machinery at a minimum of expense at points where 
special machinery or facilities for such handling exist. But where 
the lack of such facilities or the character of the freight call for a 
great deal of manual labor, the economy of water transportation 
may be readily absorbed or even overbalanced by the expense of 
handling on and off the vessel, and the more expensive but more 
flexible rail transportation becomes more advantageous. 

Occasionally, we read a wonderful tale of the economy of water 
transportation. Thus, we are told of a string of coal barges towed 
with the current down the Ohio and Mississippi rivers from the coal 
fields in Pennsylvania to the market in New Orleans. The bare 
cost of such transportation is a mere nothing. It is as if we should 
compare the cost of moving a 5,000 or 7,000-ton train down grade 
from the mines to tidewater, as has been done in special cases, with 
the average cost of operating the railroad. The expense of bring- 
ing back the boats up the stream is as much an element of the cost 
of the service rendered as the return of the cars is on the railway. 



NATIONAL BUSINESS CONGRESS 161 

The cost of service the year round, under unfavorable as well as 
favorable conditions, must be taken into consideration in determin- 
ing the average cost of any form of transportation. 

On a railway, the maintenance of the roadbed and equipment 
and the general expenses of administration, absorb 65% of the costs 
of operation; only 35% (represented by Transportation Expenses) 
are required to pay for the actual movement of the trains. In 
Water transportation, as already pointed out, by far the largest por- 
tion of the Maintenance Expense is paid for out of public funds. 
Even the interest on the public moneys invested in the waterway im- 
provements is borne by the whole people, and is not generally con- 
sidered as a part of the cost of Water transportation. Only a care- 
ful study of all the facts and the proper consideration of all the ele- 
ments of ultimate cost can determine whether inland transportation 
by Water or Rail is in reality the cheaper. 

In many cases, however, there is no choice. Our Trans-ocean 
traffic can be moved only by vessel, and our Transcontinental traffic 
can be moved only by rail. In the case of Coastwise business, there 
is a choice, and the advantages of water transportation for the heavy 
and bulky freights, not requiring costly distribution, are at once ap- 
parent. Where Rail transportation gains the advantage, it is wholly 
by reason of its smaller units and its greater flexibility of distri- 
bution. 

When it comes to interior transportation, there is obviously an 
opportunity for a difference of opinion. Here the honest, dispas- 
sionate citizen, the true statesman, the intelligent engineer — de- 
mand the fullest information. They want all the facts, and they 
Avant them stated without partiality or bias. 

It is necessary to the life of the business that in the case of Rail 
transportation, the carrier should include in his rates the cost of 
transportation, a fair allowance for the up-keep of his property, 
taxes, insurance, and a reasonable profit on the money invested in 
the undertaking; but in Water transportation, many of these ex- 
penses are borne as a public charge. In the case of artificial water- 
ways, interest on the first cost alone, when divided by the tonnage 
handled, amounts to a very substantial figure. The disregarding 
of this element of cost in some cases is justifiable ; ,in other cases, 
not. No general rule can be laid down. 



162 NATIONAL BUSINESS CONGRESS 



There is always danger in letting such questions be settled by 
sentimental or prejudiced considerations. Thus, the writer heard 
a leader in Congress and the Governor of one of our greatest states 
say that the expenditures of public funds in enormous amounts on 
the improvement of great rivers was justified, even though not one 
ton of freight availed itself of the facilities created. This is the 
most common and probably the most effective argument in favor of 
internal waterway development, but is this good sense? Is it good 
economics ? Let us not lose our heads in the discussion of questions 
of such grave economic importance, but give thoughtful considera- 
tion to the actual facts as they really exist and as they affect the 
good of the whole people. 

That railway managements, like other commercial undertakings, 
realize the force of the principle that "half a loaf is better than no 
bread," goes without saying. It is no argument against a railway 
corporation that rates in territory parallel to or competing with 
water transportation are lower than those where such competition 
does not exist. It would be equally true if the government under- 
took the manufacture or sale of any commodity without profit or at 
less than cost, it would break the price of that commodity ; and it is 
equally true that the manufacturer or merchant who, by reason of 
government competition had to sacrifice a large share of his profit 
on the sale of some commodities, would be compelled to average up 
by making a larger profit on the remainder of his business. 

Many waterway improvements are justifiable. The moderate 
deepening of a large river system, so as to give river barges their 
greatest range of operation, is decidedly desirable. The Mississippi 
river and its tributaries can be made available for a standard type 
of craft, say 1,500-ton barges having a draught of from 3 to 6 feet, 
and serve thereby a mileage of 16,630 miles. The question of the 
best available depth, size of boat, etc., is like the question of the 
gauges on the railways. Over 50 gauges have been tried, but the 
old English wagon gauge of 4'8J^ W , first adopted by Stephenson, has 
become well nigh universal. Much of the business of the country 
could be done more economically on a six-foot gauge, or even on the 
seven-foot gauge recommended by the far-seeing Brunei, the engi- 
neer of the Great Western Railway of England, and the builder of 
the "Great Eastern," but the advantage of a uniform standard over 
an entire continent outweighs the special advantages of a locality. 



NATIONAL BUSINESS CONGRESS 163 

IV-B. 

In the Case of Railway Transportation, it is obvious that its 
field is more restricted where it comes in direct competition with 
water transportation than where it has the field to itself. 

In the United States, more than in any other country, wholesale 
and long distance rates have been made with the idea of developing 
business. This is instanced by our Commodity rates, our Transit 
and Fabrication rates, and our low carload rates, as compared with 
L. C. L. rates. 

Sometimes it is argued that railways have gone too far; and, 
doubtless, they have gone farther than a benevolent despot would 
have gone had he considered the benefit of the community as a 
whole and the railways as a whole. Each railway fought for its 
own territory. 

Railways, more than any other form of transportation, have 
broken down distance. They have put the distant producing center 
practically on a parity with that near-by. In doing this, they have 
broken down monopoly, and have fostered competition. A man's 
dinner table is supplied with food from a range of easily 500 to 
3,000 miles, and he is scarcely aware of it. There is not a large city 
that could exist a week without transportation, so dependent have 
we become upon distant sources of production. 

An important feature of railway transportation which is not a 
characteristic of any other form of transportation is that it is solely 
and exclusively a public service, regulated by public authority in all 
countries where the railways are not actually owned as well as 
managed by the government. In other words, carriage — or "vect- 
ure," as Bacon called it — by rail is only by a "common carrier," 
whereas a very large part of the carriage by water and highway is 
not by the "common carrier," but by the private carrier, the "char- 
tered carrier," the owner of the freight. The Interstate Commerce 
Commission of the United States takes very serious exception (and 
properly so, I think) if the carrier has an ownership or an interest 
in the freight he transports, and yet in the case of both water and 
highway transportation, that condition of affairs is the rule, rather 
than the exception. 

The cost of rail transportation is often quoted at something 
over seven mills per ton mile. This oft quoted, but misleading 
figure, represents the average rate over the entire railway mileage 



164 NATIONAL BUSINESS CONGRESS 

of the country — over 240,000 miles. It is a rate arrived at regard- 
less of commodity, distance hauled, service rendered, etc. ; a sort of 
higgledy-piggledy averaging of oranges, apples, metals, turnips and 
coal. 

To compare Rail rates with Water or Highway rates, it is im- 
portant to compare rates for similar distances and on similar com- 
modities, and to add in the case of Water rates, the money expended 
from public funds. The terminal expenses are important in any 
case, and it makes a good deal of difference whether they are spread 
over a distance of 100 or of 1,000 miles. Obviously, the carriage of 
heavy bulk freights by water can not be compared with the carriage 
of high-class commodities over mountain ranges. The character of 
the service must be taken into consideration. 

The force necessary to pull a given load on a railway track has 
been accurately determined. Similar information with respect to 
the movement of canal boats and sea-going vessels has been worked 
out, but the data regarding it are less available and complete. In a 
general way, it may be stated that in the case of Rail transportation, 
the power required to overcome the resistance increases moderately 
as the speed increases, whereas, in the case of the vessel moving 
through water, the power necessary to overcome the resistance in- 
creases rapidly with each increment of speed. 

While it appears that the power necessary to move a given load 
through slack water is less than that required to move a similar load, 
mounted on wheels, on a smooth and level track, this fact applies 
only to loads moving at speeds of less than four miles per hour. At 
speeds above four miles per hour, Rail transportation gains rapidly 
in economy of power required, in comparison with Water transpor- 
tation. This does not mean that Water transportation must neces- 
sarily be limited to speeds as low as four miles per hour any more 
than it means that the speed of railroad trains must necessarily be 
limited to their most economical limit (approximately ten miles per 
hour), but it does illustrate the limitations of the different modes of 
transportation and the field properly occupied by each. 

IV-C. 

Highway or Street Transportation. This is the oldest form of 
transportation, yet the one which today has received the least public 
consideration as an economic question. Perhaps this is because it 



NATIONAL BUSINESS CONGRESS 165 



is so much a public question that "What is everybody's business, is 
nobody's business." To me, it appears evident that as the cost of 
gathering and distributing the freight to and from the railway is fre- 
quently quite as much as the railway freight charge (and, in the 
aggregate, the total is probably greater), it must follow that a reduc- 
tion of this cost is just as important and far-reaching as a reduction 
in freight rates. 

Here is a subject which, scientifically, is in its infancy; little or 
no data are to be found, at least in this country, on the subject of the 
cost of drayage, and the wages in this country are so much higher 
than in Europe, that European experience is of little value. How- 
ever, we do realize that better roads and large units will produce 
some marked economies ; and yet, in this great State of Illinois, the 
question of highway improvement is still, to all appearances, con- 
sidered to be of very minor importance. To my mind, no more im- 
portant work awaits the men of this organization than the study of 
the question of highway and street transportation, to determine the 
part it plays in the cost of our food and clothing; in short, of our 
cost of living. Much attention has been paid to railway and water 
transportation ; very little to highway and street transportation ; yet 
it can be shown that in many cases the latter is quite as much a pub- 
lic question as the former. 

Conclusion. The question of the cost of transportation to the 
public must be studied in its entirety in order to reach any sound 
conclusion as to its effect upon the community as a whole. It is not 
sufficient to analyze only one branch of the subject and disregard the 
others. The co-relation of the various methods must be thoroughly 
understood in order to secure from each of them the greatest bene- 
fits which it is capable of conferring. (Applause.) 

The Chairman : Gentlemen, this address is now open for 
discussion, but we have so much before us this morning we must 
gtt the work off our hands in order to give the Resolutions Com- 
mittee an opportunity this afternoon, so the Chair will have to 
limit the debate, whatever there is, to five minutes. Is there anyone 
who would like to speak in relation to this address? If so, the op- 
portunity is now here. 

The Department of State, at Washington, has honored this Con- 
gress by sending as its representative a leading official whose achieve- 
ments for the advancement of our foreign trade are a matter of gen- 



166 NATIONAL BUSINESS CONGRESS 

eral knowledge to American exporters. It is my pleasure to pre- 
sent Honorable John Ball Osborne, Chief of the Bureau of Trade 
Relations. (Applause.) 

OUR REFORMED CONSULAR SERVICE AS AN 
AGENCY IN AMERICAN TRADE EXPANSION. 

Mr. Chairman, and Gentlemen of the National Business Con- 
gress : I highly appreciate and thank you for the honor conferred 
in inviting me to address the National Business Congress. Secre- 
tary Knox has been so kind as to designate me to represent the De- 
partment of State in your sessions, and I take pleasure in express- 
ing the Department's sense of appreciation of the importance and 
helpfulness to the cause of American commercial expansion of meet- 
ings of this kind. As you are aware, the Department of State, un- 
der the able direction of Secretary Knox, has, in the last few years, 
taken a more active part in the promotion of our foreign trade than 
ever before, and hence it is keenly and sympathetically interested 
in your present discussions. This great trade policy of Secretary 
Knox has been made possible by the wise liberality of the Congress 
of the United States in generous appropriations, and it owes no 
little of its success to that energetic citizen of Chicago, Assistant 
Secretary Huntington Wilson. 

My first intention was to give you a general description of the 
trade promoting institutions of the National Government ; but when 
I reflected that this Congress is held Under the auspices of the Na- 
tional Business League of America, I decided to specialize on some 
phase in respect to which I might hope to bring at least a little genu- 
ine information, for if there is one organization in the country 
whose members keep thoroughly abreast of the activities of our 
Government in behalf of foreign commerce it is the National Busi- 
ness League of America. I presume that this intelligent familiarity 
is largely due to the efficiency of your executive officers, but it is 
surely due in some measure to the spirit of indomitable energy and 
unceasing progress that animates the great industrial forces of Chi- 
cago and the entire Middle West. 

INTEREST OF BUSINESS PUBLIC IN THE SERVICE. 

I have taken as the subject of my remarks today, "Our Re- 
formed Consular Service as an Agency in American Trade Expan- 



NATIONAL BUSINESS CONGRESS 167 

sion," which topic will give me an excuse to talk shop, as well as 
to contrast present conditions with those that existed when I was 
a Consul twenty-odd years ago. With the single exception of the 
postal service, there is no branch of the National Government in 
whose efficiency the trade interests of the country are more deeply 
concerned than in that of the Consular Service. This concern, how- 
ever, has not always been manifest, and it is only in recent years 
that our manufacturers and exporters have come to realize the po- 
tential usefulness to them of this governmental agency, with the re- 
sult that now each year it is utilized to greater advantage by an 
increasing number of business concerns. I shall presently offer a 
few suggestions as to how you may best avail yourselves of the ex- 
cellent facilities now offered by the Consular Service. 

CONDITIONS UNDER THE SPOILS SYSTEM. 

In order to fully appreciate the value of the reorganized serv- 
ice to the business interests of the United States, it is well to recall 
the conditions that existed prior to 1906. Consulships have always 
possessed a peculiar fascination to officeseekers and, under the old 
system, they were filled by all sorts and conditions of men, rang- 
ing from distinguished litterateurs, military men and retired states- 
men to ward politicians, bankrupt business men, professional fail- 
ures, individuals in quest of a genial climate, and adventurers of vari- 
ous kinds. While there was always a respectable leaven of edu- 
cated, capable, and worthy consuls, there were many totally unfit 
for the office, which has always been one of responsibility and dig- 
nity, calling for the highest type of American citizenship. 

For good and bad alike, the supreme test in making appoint- 
ments was the strength of the candidate's political influence. No 
education or training was required, and the so-called instruction 
period of thirty days meant nothing. When the average consul 
arrived at his post he found that there was actually no opportunity 
for advancement as a reward for faithful work, and, seeing no prob- 
ability of retention beyond four years, many set out to systematically 
exploit the office financially. The salaries were, as a rule, so in- 
adequate as to make the notarial fees essential for a decent living, 
and there being no inspection system many abuses grew up. . 

But perhaps the worst feature of the old service was the noto- 
rious insecurity of tenure for good and bad alike. A clean sweep 



168 NATIONAL BUSINESS CONGRESS 

at each change of the party in power was the rule, while every new 
administration of the same party involved some removals. At every 
such clean sweep a set of fairly experienced men gave way to a has- 
tily selected set of new men, to the serious detriment of both the 
service and the business interests of this country. During the first 
year of his administration President Harrison made changes in most 
of the consulships considered worth having. During the first year 
of President Cleveland's administration the clean sweep came into 
full operation. Within a period of less than ten months thirty out 
of a total of thirty-five consuls-general and 133 out of a total of 
183 consuls of the first class, besides the great majority of the minor 
consuls, were superseded and their places filled by hastily selected 
Democrats. A similar course was followed by President McKinley. 
During the period from March 4, 1897, to November 1, 1898, the 
changes in all grades above and including consulships at $1,000 
aggregated 238 out of a total of 272 officers. At the close of each 
of the administrations mentioned only a handful of representatives 
of the minority party survived in office. 

REORGANIZATION ACT OF 1906. 

Fortunately the era of the clean sweep has gone forever. Since 
1906 the Consular Service has been thoroughly reorganized and 
placed upon a strictly non-partisan merit basis. The changes ef- 
fected are so recent and the National Business League of America 
contributed so much to bringing them about that it is unnecessary 
to describe them in detail. You will recall that the Reorganization 
Act of April 5, 1906, reformed the system along structural lines. It 
regraded all consuls-general and consuls and readjusted their sala- 
ries on an equitable basis ; provided a system of regular inspection 
of consular offices by a corps of consuls-general at large appointed 
from the service; Americanized the service by requiring not only 
the consuls, but their clerks, excepting those with salaries lower 
than $1,000, to be American citizens; extended the prohibition to 
engage in trade to all consular officers with salaries exceeding $1,000, 
and made the salaries of all consuls-general and consuls their sole 
compensation of office by declaring all fees, including notarials, offi- 
cial and the property of the Government. Each of these legislative 
changes represented the correction of a specific weakness in the old 
system. 



NATIONAL BUSINESS CONGRESS 169 

You will also recall that this Reorganization Act failed to go 
as far as its f ramers — Secretary Root and Senator Lodge — intended 
and provided in the bill as introduced, which had contained import- 
ant provisions for the examination of candidates for admission to 
the service by a specified board of examiners, the definition of re- 
quired subjects of examination, the limitation of original appoint- 
ments to the two lowest grades, and the filling of vacancies arising 
in the upper grades by promotion from the lower grades as a re- 
ward for ability and efficiency shown in the service. While these 
meritorious features were dropped from the bill before its enact- 
ment, they were promptly put into operation by the Executive Order 
of June 27, 1906, and have ever since been carried out strictly and 
conscientiously by the Department. 



REFORMS BY EXECUTIVE ACTION. 

The reorganized service now comprises 57 consuls-general and 
241 consuls, or a total of 298 principal officers, of whom 60 are con- 
suls in class 8 at $2,500, and 45 consuls in class 9 at $2,000, the two 
lowest grades to which original appointments are confined. The 
examinations are both oral and written, the two counting equally. 
The object of the oral examination is to discover the candidate's 
business ability, alertness, character, address, general education, and 
natural fitness for the service. The written examination covers 
eight required subjects, namely: a modern language; natural, indus- 
trial and commercial resources of the United States ; political econ- 
omy; international, maritime and commercial law; American his- 
tory, government and institutions ; political and commercial geogra- 
phy ; arithmetic, and modern history of Europe, South America and 
the Far East. Candidates are required to obtain a general rating of 
80 on a scale of 100 in order to be eligible for certification. They 
must have been specially designated by the President for appoint- 
ment to the Consular Service, subject to examination. They must 
be between the ages of 21 and 50 years; citizens of the United 
States; of good character and habits; and physically and mentally 
qualified for the proper performance of consular work. The rule 
of proportional representation of all the states and territories in the 
Consular Service is faithfully followed. 



170 NATIONAL BUSINESS CONGRESS 

CONSULAR EXAMINATIONS SINCE 1906. 

Under the new system there have been 14 examinations held 
since 1906 for consuls, consular assistants and student interpreters. 
The number of men examined was 388, of whom 174, or 45 per 
cent, received the required passing mark. Of these successful can- 
didates 133 received appointments — 74 as consuls and the remainder 
as consular assistants and student interpreters. The number of con- 
suls appointed after examination since 1906 constitutes 25 per cent 
of the principal consular officers. It is an interesting fact that the 
statistics of these examinations demonstrate completely the bona 
fides of the system. That the examinations were stringent is proved 
by the fact that 55 per cent of those examined failed and were re- 
jected. That appointments were made on a strictly non-partisan 
basis is proved by the fact that of the 74 consuls 36 were from 
Northern states and 38 from Southern states. The Executive Order 
of 1906 prescribes that neither in the designation for examination 
or certification or appointment will the political affiliations of the 
candidate be considered. Hence, information respecting this mat- 
ter is unknown to the Department of State. Another fact which 
shows the equitable proportional representation of consular officers 
among the states and territories is that of the 74 consuls referred 
to 48 are from states east of the Mississippi and 26 from states and 
territories west of that river. This is in reasonable proportion with 
the distribution of population, according to the census of 1910, 70 
per cent of our population lying to the east and 30 per cent to the 
west of the Mississippi. It may also be added that the 133 persons 
appointed to consular offices as the result of these examinations rep- 
resented 39 states and territories of the Union. 



THE NEW TYPE OF CONSUL. 

Just a word as to the educational equipment of the new type 
of consul. In the earliest examinations under the new regime it 
was noted that the typical candidate was much the same as under 
the old system ; but there has been a change for the better, and to- 
day the men designated to take these examinations represent a very 
high type. This is because the difficult character of the examina- 
tions has become well known and Senators endeavor to recommend 
for designation only those likely to acquit themselves creditably. 



NATIONAL BUSINESS CONGRESS 171 

While the possession of a degree is not required, as in the case of 
France for admission to the Foreign Service, it will be perceived 
that the scope of the examination eliminates men of deficient educa- 
tion. The examination is one that calls for a liberal education, and 
about 75 per cent of those who have passed have enjoyed at least 
some college experience, most of them holding degrees. This, how- 
ever does not bar the young man who gives himself, without in- 
struction, the substantial equivalent of a college education. 

It may be suggested that previous business training and experi- 
ence should be a prerequisite for consular appointment. While we 
all recognize the immense value of business experience, we would 
not wish to see the service filled up with business inefhcients and 
bankrupts. The great difficulty is to induce any successful business 
man to surrender the financial potentialities of the business world 
for the consular salaries in the entrance grades. Fortunately, how- 
ever, all the universities and colleges of the country are making their 
courses of study more practical than formerly, and hence the old 
idea that a college training was valueless for a business career is 
no longer generally held in the business world. Here in the Middle 
West, where you have such excellent state-aided universities as Illi- 
nois and Wisconsin, and generously endowed institutions like Chi- 
cago, with their thousands of students in attendance, this proposi- 
tion requires no argument. The typical graduate of these institu- 
tions is splendid material for the making of a good consul. 



CONSULAR EFFICIENCY RECORDS. 

There is still another feature of the reorganized system that 
should be borne in mind. This is the permanent efficiency record 
of all consular officers kept in the Department of State and made 
up from all sources of information available to the Department. 
One of the most important elements of this record is the character 
of the consuls' reports upon the trade relations of the United States. 
This record is consulted by the Secretary of State and brought to 
the attention of the President in determining questions as to reten- 
tion in office, transfers, and promotions. It furnishes the strongest 
possible incentive to all consular officers to render meritorious and 
valuable service to the business interests of the United States. 



172 NATIONAL BUSINESS CONGRESS 

m I,. 

THE CONSULAR SCHOOL IN THE STATE DEPARTMENT. 

Under the present system the instruction period of thirty days 
allowed by law to newly appointed consuls has been galvanized into 
genuine usefulness by the Department of State. During this period 
consuls are required to follow systematic instruction under official 
guidance. Every day and almost every hour is taken up in studying 
the consular regulations or listening to addresses by bureau chiefs 
of the Department of State or other branches of the executive de- 
partments whose work pertains to consular activities. This instruc- 
tion work gives the consular officers an intelligent conception of the 
duties they are about to undertake. 

TRADE CONFERENCES WITH CONSULS ON LEAVE. 

Another useful innovation introduced by the Department of 
State since last August is the plan of trade conferences between 
consular officers on leave in the United States and the business men 
of the country. Consuls are required to prepare themselves before 
going on leave to answer accurately such practical questions as the 
business men of the United States may desire to ask them and to 
notify the Department, as far as possible in advance, of the probable 
dates of their arrival and periods of stay in the principal business 
centers. This information is transmitted by the State Department 
to the Department of Commerce and Labor and is published in the 
"Daily Consular and Trade Reports," in order that business organ- 
izations may arrange for trade conferences with the consular officers. 

SCOPE OF COMMERCIAL SERVICES OF CONSULS. 

Let us now consider the concrete results of the reformation of 
the Consular Service so far as the commerce of the United States 
is concerned. Consular activities in this field may be conveniently 
divided into three classes: (1) information and advice furnished 
by the consular officer within his district, either at the consulate or 
elsewhere; (2) information and advice furnished by the consular 
officer in correspondence in response to inquiries from the Ameri- 
can business public; (3) reports to the Department of State on 
commercial and industrial conditions in foreign countries and open- 
ings for American trade development. 



NATIONAL BUSINESS CONGRESS 173 

(1) IN THE CONSULAR DISTRICT. 

Consular officers are expected to cultivate friendly relations with 
the merchants and importers of their districts, as well as with the 
commercial authorities of the place, so that they may keep in close 
touch with the market conditions and opportunities for the introduc- 
tion of American goods, and so that when trade information is de- 
sired it may be more readily obtained. To this end consuls some- 
times join the local chamber of commerce and attend regularly its 
meetings. They often inform the local business public, sometimes 
through the medium of the press, that the consulate is ready to an- 
swer inquiries in regard to American products. Some consuls, 
where their other duties do not conflict, make a practice of visiting 
local business houses in order to discuss conditions relating to trade 
with the United States and to endeavor to impress the importers 
with the superiority of American goods. 

All consular officers are required to keep on file the catalogs 
and other trade literature sent to them by American manufacturers 
and exporters with a request to that effect. When requested to do 
so by the senders, most consuls cheerfully transmit catalogs and 
circulars to local firms which are likely to be interested in the con- 
tents. The best regulated offices in the service keep the catalogs on 
file, arranged and indexed so as to be readily accessible in case of 
local inquiries. 

Nearly all the leading trade journals of the United States are 
furnished gratuitously to the consular offices throughout the world 
and are kept on file in a place in the consulate set aside for the 
purpose. Frequently consuls when buying goods make a point of 
asking for American-made articles and speaking of their superiority, 
good qualities, etc. 

All consuls are expected to afford proper assistance by advice 
and information to American salesmen, putting them into touch with 
local buyers whenever possible. As regards samples of American 
goods received by the consular officers, some consuls make a prac- 
tice of handing these samples to firms known to be interested in 
the particular line of goods. Countless instances of the establish- 
ment in foreign countries of agencies for American products through 
the endeavors of consular officers have been brought to the atten- 
tion of the Department. 



174 NATIONAL BUSINESS CONGRESS 

The following statement was recently made by an American 
consul in the Far East in respect to the steps taken by him toward 
the extension of American trade in his consular district: 

"I have made careful inquiries into possibilities of American 
trade and have informed the exporters in the United States accord- 
ingly. 

"I have personally induced local importers to carry American 
goods by supplying them with samples and explaining the merits of 
the American product. 

"I have also placed American catalogs and trade publications 
with the leading importers, supplying them with general information 
from time to time calculated to promote American trade at this port. 

"I have furnished a commercial exhibit room at this consulate, 
placing trade literature and samples there, and informed the local 
chamber of commerce of this fact, inviting its members to avail 
themselves of its advantages and explaining that an interpreter is 
detailed to explain such features as may interest them most. 

"I have supplied the local chamber of commerce with copies of 
American trade publications. 

"I have reported to the Department of State from time to time 
with regard to the commercial situation at this port and opportuni- 
ties for American trade in this district. 

"I have discovered various imitations of American trade marks 
with a view to preventing the same." 

(2) CONSULAR TRADE CORRESPONDENCE. 

One significant measure of the increased usefulness of the new 
consular service is the growth in volume of trade correspondence 
between consular officers and inquirers in the United States, most 
of which passes through the Bureau of Trade Relations of the 
Department of State. In the calendar year 1910, about 14,000 such 
letters from the consuls passed through the bureau mentioned, while 
in the past eleven months of the present calendar year, the number 
has closely approximated 16,000. They dealt with every phase of 
our trade relations and, being answers to practical questions of prac- 
tical business men, they contained valuable information, much of 
which was made available to others interested in the subject through 
data furnished by the Bureau of Trade Relations to the Bureau of 
Manufactures of the Department of Commerce, and Labor, the 



NATIONAL BUSINESS CONGRESS 175 

identity of the American inquirers being, of course, kept confiden- 
tial. This system has given the maximum of commercial utility to 
this branch of consular work. 

In general, it may be said that consular officers are expected to 
answer concisely, promptly and accurately, requests for legitimate 
business information, so far as practicable and consistent with the 
discharge of other duties imposed upon them by law. They are ex- 
pected, therefore, to give advice and counsel to American firms who 
are endeavoring to build up a foreign trade, and they frequently 
direct attention to defective methods pursued and suggest remedies. 
They give careful attention to requests from American concerns for 
names of local firms in good standing or with special facilities for 
doing commission business. 

(3) COMMERCIAL REPORTS TO THE DEPARTMENT OF STATE 

Another striking evidence of the improvement in the consular 
service is the growth in the consular trade reports and a general im- 
provement in their quality. The number of these reports handled 
annually by the Department, has increased from about 4,000 in the 
fiscal year 1904, to nearly 20,000 in 1911. The latter number, how- 
ever, includes copies of certain trade letters. The reports proper 
now average about 10,000 a year. 

These trade reports are made partly in answer to instructions 
of the Department, and partly on the initiative of the consular 
officers. They are all carefully edited in the Department of State 
and then transmitted to the Department of Commerce and Labor 
with a view to their publication in the "Daily Consular and Trade 
Reports," or their dissemination among selected American manu- 
facturers through the medium of confidential bulletins. 

Besides an annual report on the commerce and industries of 
their respective districts for the calendar year, all consuls are re- 
quired to answer, with reasonable promptness and after due inquiry, 
all instructions of the Department of State in relation to trade re- 
ports desired for publication or other use. They are urged to keep 
in touch with the industrial and commercial situation in their re- 
spective districts, and to report full and accurate information in re- 
gard to these conditions, with special reference to every possible 
opening for American trade extension. They are expected to offer 
suggestions of practical value for the increase of the sales of Ameri- 



176 NATIONAL BUSINESS CONGRESS 

can goods, specifying kinds in demand and methods by which 
American firms can best place them on the market. Each year they 
are required to send a complete revised list of the local importers 
and dealers of their districts for the benefit of American exporters. 
They are particularly urged to exercise the utmost vigilance to dis- 
cover and report foreign trade opportunities, such as public tenders 
for supplies and improvements and private enterprises, care being 
taken to report only propositions that are represented by responsible 
persons. In cases of urgency and special importance, they are au- 
thorized to report trade information by cable. 

CONCRETE INSTANCES OF TRADE EXTENSION. 

Many concrete instances of American trade extension as the 
direct result of the commercial activities of our consular officers 
under the new system have been reported to the Department. On 
this subject Hon. Wilbur J. Carr, the Director of the Consular 
Service, who knows accurately more about its activities than anyone 
else, mentioned, in a recent address, several noteworthy instances 
where benefits followed from trade information furnished by our 
consuls, such as the sale of 100 miles of wire fencing, the sale in 
Siberia of sixteen carloads of machinery by one firm, and of twenty 
carloads of diversified manufactured products by another firm in 
various foreign markets, and a contract for a half-million dollar 
bridge. 

In his message to Congress a few days ago, on foreign rela- 
tions, President Taft referred to the fact that in the last fiscal year, 
for the first time in our history, the exports of domestic merchan- 
dise exceeded the two billion dollar mark, being an increase of 300 
million dollars over the figures for the previous year. Another in- 
teresting fact is that the present indications are that when the cur- 
rent calendar year is completed, our exports of manufactured goods 
will have approximately reached, if not surpassed, a valuation for 
the year of one billion dollars. Manufactures are pre-eminently 
the subject matter of international commercial competition, for our 
staple raw materials like cotton, wheat, tobacco, and mineral oil 
virtually sell themselves. There is no doubt that the present ener- 
getic trade policy of the Department of State and the responsive 
efforts of the consular officers, have contributed materially to the 
gratifying expansion in our export trade revealed in the statistics 
mentioned. 



NATIONAL BUSINESS CONGRESS 177 

TESTIMONIAL LETTERS FROM MANUFACTURERS. 

It has been a source of gratification to the Department of State 
to receive letters from more than 100 American firms that have 
succeeded, through the help of consular officers, in obtaining new 
or wider markets for their products in foreign countries. Most of 
these commendatory letters specify concrete instances of American 
trade extension through the activities of the Department of State, 
and the consuls. I have thought that it might interest you to hear 
some literal quotations from these letters, without disclosure of the 
names of the writers, which are regarded as confidential. All the 
letters from which I quote, were received by the Department of 
State in the present year, and relate to actual conditions in the 
service. 

A piano manufacturing company writes as follows : 

"We are very glad, indeed, to have the opportunity which your 
letter of the 1st gives us, to express our appreciation of the really 
invaluable information given us by the members of the Consular 
Service with respect to the local conditions in various parts of the 
world attendant upon the merchandising of pianos and player 
pianos. Our requests for information have invariably resulted sat- 
isfactorily to us, and we have been very much impressed with the 
efficiency of our Consular Service." 

A manufacturing company of Cincinnati, writes : 

"We are pleased to report that the Consular Service has been 
very helpful to us in our efforts to build up a larger foreign client- 
age. We consider the publication of the ''Daily Consular 
and Trade Reports," one of the best things ever offered to 
encourage the exporter. Every item of possible interest to us is 
promptly and persistently followed up, with the result that we have 
made some very valuable trade connections. We also frequently 
take occasion to communicate with the consuls direct, many of 
whom have replied offering information and suggestions from which 
we have benefited greatly. This very week we have entered orders 
from two new customers in South America whose names were both 
furnished by consuls." 

Another manufacturing company of the same city, writes : 

"Having carried on an export business for a good many years, 
we take pleasure in stating that we have noticed in the last few years 
a decided improvement in the American Consular Service." 



178 NATIONAL BUSINESS CONGRESS 



A manufacturing company of Jersey City, writes : 

"We have a feeling that within the past few years the United 
States has made a great improvement in its consuls; that the con- 
suls are much better equipped as business men." 

A manufacturing company of New York City, writes : 

"It is a special pleasure to us to congratulate you upon the 
efficiency of the Consular Service, which in our mind is unequalled 
and which cannot be too highly appreciated by all American manu- 
facturers working for export, that avail themselves in an intelligent 
manner of the facilities extended to them by this service and that 
will heed the indication and information given in the "Daily Con- 
sular and Trade Reports" to further the growth of their export 
business." 

An American safe manufacturer writes : 

"We beg to state that the results obtained thus far have been 
quite satisfactory, and the service rendered by the consuls at the dif- 
ferent posts in foreign countries, has proved of inestimable value 
to the development of our export trade." 

A firm of New York City writes : 

"We can answer this question unqualifiedly, that we have de- 
rived a very considerable benefit from such reports, and that we find 
our consuls, as a rule, are not only able but very willing to extend to 
us responses to requests for information which we make either 
direct or through the Department of State. 

"We have during the last few years, seen a continuous im- 
provement in such service which doubtless implies that the govern- 
ment is very materially improving such service, and we feel that the 
people of the United States, as a whole, and the manufacturers par- 
ticularly, should be gratified over such improvements." 

A manufacturing concern in Massachusetts, writes : 

"An immense majority of the reports indicate very clearly that 
the consular officer made a careful investigation of the facts before 
making his report. The accuracy of the reported facts, and the 
conclusions reached have been later confirmed in several instances, 
and in no case have we discovered that the information furnished 
was inaccurate." 

A Hartford concern writes: 

"We beg to advise that we appreciate most thoroughly the 
work the American consuls have been doing for us throughout the 
world, which has been most valuable." 



NATIONAL BUSINESS CONGRESS 179 

The manager of an Indiana manufacturing company, writes : 

"I desire to emphasize the fact that I have been in the export 
business for years and I have had the opportunity of coming in con- 
tact with consulates in all corners of the globe, and that I found 
that the personnel of the consular corps has been brought up to the 
standard which assures the American manufacturers of assistance 
second to none. I know full well that no one can build up an ex- 
port trade in a day or in a year, but only by persistent hammering. 
I could name a few consuls who have gone out of their way to 
assist me many a time. I have asked questions which they were not 
obliged to answer, but I must say that I always found them ready to 
do their utmost to further American trade. 

"I have made a close study of the export business and can only 
say that the American manufacturer who gets in touch with our con- 
suls has no cause to fear that other people will get better assistance 
from their representatives abroad than Americans do. Indeed, 
many a time Englishmen and even Germans have told me that our 
consuls did wonderful yeoman service for our business houses, and 
that no matter what they tried, other nations could not get their 
consuls to give equally satisfactory assistance." 

A Chicago firm writes : 

"We are much pleased with the courtesies and aid given us in 
advancing the sale of our products in foreign markets, and we are 
greatly pleased to add we have obtained concrete results through 
the medium and assistance from your Consular Service, and look 
forward to a still increasing business." 

A Michigan firm writes : 

"We have not hesitated in the least to call upon the American 
consuls for help and they have not only responded in all cases 
promptly and in a business-like way, but they all seem to show a 
great interest in the promotion of the sale of American-made goods 
in foreign countries. We can not say too much for the service we 
have received." 

A Detroit firm writes : 

"We peruse these trade reports every day very carefully, as we 
have thousands of times found information in them that has led to 
large sales. In fact, in one instance, we were given through these 
reports, the name of an agent who came here to the United States 
to see our plant and investigate our products, who has since pur- 
chased twenty thousand dollars' worth of motor boats." 



180 NATIONAL BUSINESS CONGRESS 

A New Jersey firm writes : 

"From quite a number of American consuls we have received 
valuable information as well as inquiries that have led to business, 
and we believe the Consular Service will prove to be a valuable help 
to the American manufacturer seeking to extend his foreign com- 
merce." 

A Cincinnati firm writes : 

"We have used this service considerably, and have found it 
most excellent and constantly improving. The letters we have had 
from American consuls all over the world within the past two years, 
have given us very complete and reliable information in answers to 
our inquiries, and we find this service most valuable to us." 

A Minnesota firm writes : 

"Speaking from the standpoint of the manufacturer, we con- 
sider the consular service one of our most available assets in the 
development of foreign trade. It is through their offices that we 
learn the possible markets for our product; it is through them, in 
most part, that we obtain the names of our possible customers ; and 
it is through the high personnel of this service that we have found 
the trade abroad inspired with confidence in American goods. 

"While millions of dollars are spent annually in exploiting for- 
eign fields through the channels of advertising, we have found the 
most effective results in the assistance rendered by our consular 
offices. 

"It is the one force today that, properly strengthened, is capa- 
ble of opening the markets of the world to American goods in pref- 
erence to the cheaper products of competitive nations, and in work- 
ing out reciprocal tariff treaties with the countries of all America." 

A Massachusetts firm writes : 

"We would say that the service is of much material benefit to 
exporters who depend entirely upon correspondence to make busi- 
ness connections. In the case of traveling representatives, we 
would consider that the consuls would be of far greater assistance in 
securing good connections, by profitable introductions to the leading 
merchants and business men of their stations." 

A Cincinnati firm writes : 

"In general, the writer believes from personal experience with 
very many of our consuls abroad that the personnel of our consular 
organization is now superior to that of any other country in the 



NATIONAL BUSINESS CONGRESS 181 

world from a business standpoint; in fact, he knows that German 
importers in South America have asked that their own service be 
brought up to the standard of ours, and one has only to pick up any 
British export trade publication to find complaints from British 
importers abroad as to the relative efficiency of their own and 
American consuls." 

A great American publishing house writes : 

"We are delighted to have the opportunity to say to you that a 
representative from our house, who recently made a trip around 
South America, stopping at the principal cities, met without excep- 
tion, with most courteous treatment and with valuable assistance 
every time he called upon a consular representative of the United 
States." 

An important manufacturing company in New York City, 
writes.: • 

"All we can say is, that all our requests to various consuls have 
received the most careful attention and we want to tender our con- 
gratulations to the department in maintaining such an efficient force 
of clear-sighted men. 

"We deem it a privilege to be able to acknowledge in this way 
our gratitude for services we would otherwise be unable in any way 
to obtain." 

HOW TO UTILIZE THE SERVICE. 

It has occurred to me that you would probably like to have some 
specific suggestions as to the best way for you as manufacturers and 
exporters to make use of the improved machinery of the Depart- 
ment of State and the consular service for the promotion of your 
foreign trade. I will endeavor to make them as concise as possible. 

(1) If your firm is not already on the mailing list for receipt 
of the "Daily Consular and Trade Reports," I suggest that you write 
at once to the Secretary of Commerce and Labor, requesting that 
your name be so listed in view of your practical interest in foreign 
trade conditions. 

It should be the business of some one in your concern to regu- 
larly read over each number of this useful publication as soon as it 
arrives, with special reference to consular reports published therein 
on the subjects and markets in which you are interested and the 
foreign trade opportunities listed in that department of the publi- 
cation. It might also be of advantage to you to take note of the 



182 NATIONAL BUSINESS CONGRESS 

expected visits to your community of American consular officers 
on leave. 

(2) If you desire specific information in relation to commer- 
cial or industrial conditions in foreign countries, I suggest that you 
write either to the Department of State or the Department of Com- 
merce and Labor, requesting that you be furnished with printed 
copies of such consular reports or other data as are available on 
the subject. If the information is not already in the possession of 
the Government, your request will probably be made the subject of 
an instruction from the Department of State to one or more con- 
sular officers. When the replies are received, a complete set of the 
reports will be transmitted to the Department of Commerce and 
Labor for possible publication, and you will be furnished with 
copies. 

(3) If you desire any specific information in relation to your 
own trade in a particular country, in respect to which the informa- 
tion on file would, in all probability, fail to be completely responsive, 
the best and quickest way is for you to write direct to the American 
consul in the appropriate district. Assuming that it is a legitimate 
inquiry, the consul will at once investigate the matter and send his 
reply to you through the Department of State, by which it will be 
transmitted to you without delay; or, inspired by your letter and 
perhaps other inquiries along the same lines, the consul may, at his 
option, make a report to the Department of State for publication by 
the Department of Commerce and Labor and for transmission to 
you as one of the inquirers. 

(4) If you are not in possession of an accurate list of Amer- 
ican consular officers I suggest that you write for the same to the 
Department of State, which has for distribution a mailing list of 
these officers. 

(5) In your correspondence with American consular officers 
you should bear in mind that their duties are multifarious and often 
extremely difficult. When disturbed political conditions prevail in 
the country it is usually impossible for the consul to give prompt 
attention to inquiries about trade, for the protection of the personal 
and property rights of American citizens must take precedence. Be- 
fore complaining of the neglect of a consul in replying to your 
request for information you should make due allowance for mail 



NATIONAL BUSINESS CONGRESS 183 

delays and a reasonable margin for inquiry, and perhaps corre- 
spondence, by the consul in his district. You should also be care- 
ful to prepay in full the proper postage on your own letters to the 
consul; but his reply will come to you through the Department of 
State without any cost whatsoever to you. 

I would also remind you that consular officers must not be re- 
garded as spies to ferret out foreign trade secrets or as commercial 
travelers to peddle samples or distribute trade literature indiscrimin- 
ately. Nothing so unreasonable should be asked of officers who are 
expected at all times to uphold the dignity of our Government and 
retain the respect of the foreign community. Furthermore, as you 
are all doubtless aware, the consular officers are not permitted to 
report to private inquirers concerning the financial standing or com- 
mercial repute of business men or houses in their districts, although 
they may refer such inquirers to banks or other business agencies ; 
or they may quote the ratings of local business agencies. 

(6) If you are not already in possession of the volume known 
as the "World 'Trade Directory," published in 1911 by the Depart- 
ment of Commerce and Labor and containing the names of many 
thousand dealers and importers in foreign countries, classified by 
industries and products, I suggest that you make application to the 
public printer at Washington for this document, which is sold at $5 
a copy. 

I understand that this useful publication is the result of the 
recommendations of the National Business League of America. 

(7) While it is not practicable for American manufacturers 
of all lines to send abroad American salesmen or even to maintain 
foreign agencies, whenever this is done I suggest that you advise 
the appropriate consular officer of the fact, in order that he may 
extend such aid to your representative as is possible and proper. 
Whenever you send out an American salesman you should give him 
binding instructions to call at every American consular office in his 
territory. Our consuls frequently complain that American salesmen 
fail to visit the consulate. The consul stands ready to assist every 
properly accredited American salesman by advice and information, 
and some have expressed the willingness to introduce them by let- 
ter or personally to managers of local jobbing or commission houses 
in good standing. 



184 NATIONAL BUSINESS CONGRESS 

(8) Lastly, if you desire general information in respect to a 
proposed trade policy or conditions applicable to particular regions 
before embarking in export trade or enlarging the scope of your 
present operations, and the matter would seem to require extended 
consideration, I suggest that you go to Washington and visit the 
Department of State for personal conferences either in the Bureau 
of Trade Relations, which is now well equipped for this purpose, or 
in one of the several politico-geographic divisions which a wise fore- 
sight has provided in the departmental expansion that took place 
about two years ago. 



MERIT SYSTEM IN THE DIPLOMATIC SERVICE. 

In view of the co-ordination of the Diplomatic and Consular 
Services for the promotion of our foreign trade I should like to 
make brief mention of the extension to the former service in all 
grades up to chief of mission of the essential principles of the Execu- 
tive Order covering the Consular Service. By an Executive Order 
issued by President Taft on November 26, 1909, the examination, 
appointment and promotion of secretaries of embassy and legation 
in the diplomatic service were carefully regulated on virtually the 
same merit basis as applies to the Consular Service. Since the date 
of that order there have been three examinations held wherein oil- 
men were examined ; 26 passed successfully and 24 received appoint- 
ments as secretaries of embassy or legation, of whom 17 were from 
the Northern States and 7 from the Southern States. Although in- 
vitations were extended to the young men of the South through 
members of Congress and the heads of educational institutions com- 
paratively few candidates have come forward from that part of the 
country. 

During the last two years the Department of State has so admin- 
istered the Diplomatic Service as to make it an effective agency in 
the promotion of the foreign trade of the United States. From 
authoritative statements made to the Department it appears that 
American citizens engaged in commercial and financial enterprises 
in foreign countries have received advantages valued at no less than 
$120,000,000 as a direct result of the practical activities of this 
branch of our foreign service. 



NATIONAL BUSINESS CONGRESS 185 

CONSULAR SERVICE ALMOST SELF-SUPPORTING. 

It will interest you as business men to know that notwithstand- 
ing the substantial upward revision of consular salaries the Con- 
sular Service is nearly self-supporting. Its entire cost in the fiscal 
year ended June 30, 1911, was $1,954,000; and the revenues to 
the treasury in consular fees amounted to $1,712,000, leaving a net 
cost to our Government of only $242,000. 

LEGAL BASIS FOR MERIT SYSTEM NEEDED. 

In conclusion, I desire to say a few words respecting the cul- 
minating step in the reorganization of the Consular and Diplomatic 
Services. It is most desirable that the important constructive work 
accomplished by the President and the Secretary of State with so 
much care and impartial fairness to the people of all political parties 
and sections of the country should not be impaired or even men- 
aced by any situation that might arise in the future. The present 
system established for the two branches of our foreign service by 
the Executive Orders of June 27, 1906, and November 26, 1909, 
should, therefore, be placed upon a permanent legislative footing, 
so that, as at present, the qualifications of candidates for appoint- 
ment shall be determined by impartial examination, regardless of 
any political affiliations ; that all original appointments shall be made 
only to the lower grades, and that promotion in the service shall be 
based only upon efficiency and ability shown in the service. 

THE LOWDEN BILL. 

The business sentiment of the entire country has crystallized 
clearly and emphatically in favor of the perpetuation of the present 
system, and this can be accomplished only by the enactment by Con- 
gress of a law for this purpose. Several bills to this end have been 
introduced in Congress, notably the Cullom-Sterling Bill, which has 
received the support of chambers of commerce generally, and the 
Lowden Bill. While the former bill would certainly perpetuate the 
existing system, the sentiment in Congress is that it is unconstitu- 
tional and hence the Department of State believes that it is futile to 
urge its passage. On the other hand, the bill introduced during the 
last session by Representative Lowden of Illinois and favorably re- 
ported by the Committee on Foreign Affairs presents no such objec- 



186 NATIONAL BUSINESS CONGRESS 



tion, and yet it would accomplish all that can reasonably be expected. 
The Honorable Huntington Wilson has well said of this bill in a 
recent address : 

"It perpetuates the diplomatic, consular and departmental 
examination; makes mandatory the keeping of impartial effi- 
ciency records in all three branches of the foreign service; it 
makes mandatory the report of the Secretary of State to the 
President of all these data. It stops there, leaving a President 
free to make appointments, but to make them under the moral 
pressure of having before him all the data showing who has, 
through impartial examinations and through the keeping of the 
efficiency records, been found fit for appointment or promo- 
tion, and having that all before him as the result of and with 
the sanction of a law of Congress. Every one interested in the 
foreign service who is familiar with it feels that that bill is an 
ideal bill ; and I want to bespeak for the American business men 
here their cordial support of that, instead of one there is no 
chance of getting." 

According to the Lowden Bill the board of examiners for the 
consular service shall be composed of the officer charged with the 
administration of the consular service, the chief of the Consular 
Bureau, the chief of the Bureau of Trade Relations, and the chief 
examiner of the Civil Service Commission, or such other officer as 
that Commission shall designate. However it is accomplished I am 
sure that the business public of this country will welcome the enact- 
ment of a law giving permanent effect to the reforms established by 
executive action in the Consular and Diplomatic Services of the 
United States. 

• NATIONAL ADVISORY BOARD OF COMMERCE. 

In mingling with the delegates to this Congress during the last 
two days I have heard several gentlemen express themselves as in 
favor of the establishment of a quasi-official connecting link between 
the United States Government and the business interests of the 
country, somewhat along the lines of the National Council of Com- 
merce, which was established under the auspices of the Depart- 
ment of Commerce and Labor a few years ago. Looking at the mat- 
ter from the viewpoint of the commercial activities of the Depart- 
ment of State, I have always been in favor of the basic principles 
underlying the National Council of Commerce, and it seems to me 



NATIONAL BUSINESS CONGRESS 187 

that if the National Business League of America, with the prestige 
of its splendid achievements in the fourteen years of its career, 
would galvanize into practical usefulness this plan of an authoritative 
medium of communication between the trade promoting institutions 
of the United States government and the commercial organizations 
of the country, it would thereby perform a great and enduring serv- 
ice to the American business public. 

Last year it was my privilege to visit the principal commercial 
countries of Europe on behalf of the Department of State for the 
purpose of studying organizations and methods of their official trade 
promoting institutions. In Germany, France, Austria-Hungary, 
Italy, Belgium and the Netherlands, I found that the Chambers of 
Commerce by reason of their quasi-official status, constituted an 
important feature of the trade promoting institutions of the Na- 
tional Government. The machinery was particularly well organ- 
ized in the German Empire, and enabled the German government to 
obtain promptly and authoritatively a correct expression of the 
needs and wishes of the different industrial committees, and, on the 
other hand, to disseminate confidentially through the chambers of 
commerce to German industrialists, trade information received from 
the foreign agents of the government. 

In the United States a great difficulty is encountered in any 
attempt to duplicate the German system, inasmuch as our cham- 
bers of commerce are loosely and variously organized with abso- 
lutely no cohesiveness, except such as is offered by the National 
Business League of America and the National Board of Trade. It 
seems to me that through your activities a most useful advisory body 
might be created, which might appropriately be called THE NA- 
TIONAL ADVISORY BOARD OF COMMERCE. While such 
an organization would be of obvious assistance to the Department 
of Commerce and Labor in disseminating confidential information 
to American business concerns, it would be equally helpful to the 
Department of State in many ways, particularly in tariff negotia- 
tions with foreign governments. In the past it has often been diffi- 
cult for the department to know what tariff concessions it is most 
desirable to demand in particular countries, when there is a willing- 
ness shown to improve the conditions of access to their markets. 
There are also frequent instances when the Department of State 
desires to confer with representative American business interests in 
regard to actual or threatened discriminations in foreign countries 



188 NATIONAL BUSINESS CONGRESS 

against the commerce of the United States, and to obtain from them 
reliable information on which to base diplomatic representations to 
the offending governments. A National Advisory Board of Com- 
merce would act as a clearing house for the views and requests of 
the business organizations of the entire country, which it is deemed 
desirable to place in definite form before the Department of State 
for its consideration and possible diplomatic action. 
Gentlemen, I thank you. (Applause.) 

The Chairman : Gentlemen, I am sure we are all greatly in- 
debted to Mr. Osborne for this very valuable address. There is 
much food for thought, and I am sure we will get great benefit 
from it. 

Mr. Charles J. Vopicka : Mr. Chairman, I would like to say 
a few words in regard to that interesting report which I have just 
heard. In the first place, I want to congratulate the National Busi- 
ness League of America for its work in trying to reform the work 
of the consuls of the United States. It seems to me that the League 
did not go far enough. It seems to me when you want to regulate 
something you must take into consideration the persons who are to 
be reformers of the Consular Service ; that you should have a prac- 
tical man in your service, and you must pay him a reasonable salary. 

I was astonished to hear the report that most of the consuls 
were getting $2,000 or $2,500 or $3,000 a year in the service of the 
United States. I ask you, gentlemen, as practical business men, can 
you expect a good sharp business man as your representative in dif- 
ferent cities in this world for that? I say to you that you can not. 
Whom can you get to go and take the examination for consul for 
$2,000 a year? You might get a young man who is ambitious, and 
who probably has some education, just coming fresh from the col- 
lege or from the university. That is not the kind of a representative 
the business people of America want to have. They want sharp 
business men from whom they can expect good advice ; from whom 
they can expect that his advice will help their trade or their export 
or import, whatever the case may be. It seems to me that if you go 
on and have this Consular Service put on a proper basis, you should 
see to it that our men are better paid. 

You know how shameful it looks when you go to the Consular 
Service in Europe and they tell you to go to such and such a place 
which is far from the select residence district of the city; in other 



NATIONAL BUSINESS CONGRESS 189 

words, a man like that must look out that he may live on $2,000 a 
year and pay as little as possible for rent, and so on. It is surely a 
shame that they do not pay the consular officers properly. The 
United States pays less to their consuls than any other country in 
the world. Now, why do they not give a man reasonable pay and 
expect services from him? Not only that, if a man is in service for 
five years or so — I don't know that these bills will be passed — then 
he will get a raise. But if you simply keep on paying them this 
way you will fail in the end. There is absolutely no question about 
that. 

Dr. Samuel MacClintock: Mr. Chairman, I realize it is 
quite late, and, therefore, there is no opportunity at this time to dis- 
cuss any of these questions, but if any of you gentlemen were here 
on Monday you may remember that I brought out the point that is 
being made by this gentleman. Also one or two other points along 
the same line, desiring to bring your attention to the fact that it is 
absolutely necessary to take some action in order to increase the 
efficiency of your Consular Service by bringing into it a better class 
of men. As this gentleman has said, you cannot get the right kind 
of men to go into the service and stay in it as a life occupation and 
feel they are justified in cutting themselves off from their home sur- 
roundings and influences for the salaries that we are paying. 

It seems to me, therefore, that if this matter were given a little 
consideration and urged upon our representatives in the ways that 
we have of doing so it would be very timely. 

I was in Washington two or three weeks ago and talked with 
one of the gentlemen who was very largely concerned in the admin- 
istration of the Consular Service. He practically said that our great 
need now is to draw into the service the kind of men who are cap- 
able of rendering the services that are demanded by the business 
community. Now, I do not believe that our present scheme offers 
sufficient honors, emoluments or inducements of any kind to do this. 
The plan that is in operation is effective and efficient, but it does 
not succeed in drawing the best men into the service. That is a 
thing, therefore, which I think might be very well considered by the 
Resolutions Committee of this present Congress. (Applause.) 

The Chairman : Gentlemen, we will now have the pleasure of 
hearing from the Hon. E. Clarence Jones, of New York, Presi- 



190 NATIONAL BUSINESS CONGRESS 

dent of the American Embassy Association, on the subject: 
"ELASTIC CURRENCY FOR THE PEOPLE, STABLE, 
FLEXIBLE, RECONVERTIBLE." (Applause.) , 

Mr. E. Clarence Jones : Mr. Chairman and Gentlemen — It 
is always a pleasure to address what might be called by us of the 
Atlantic seacoast a Western body. I find I always get inspiration 
from the West. I find the West is more progressive than most of 
us on the Eastern coast are. 

It was two years ago that we opened a campaign in favor of 
the government purchasing homes for its ambassadors abroad. On 
that occasion the National Business League of America, as well as 
the Chicago Association of Commerce, gave us their unstinted sup- 
port, and I think it is largely due to the introduction and opportunity 
they gave us that we carried the work to a successful issue and suc- 
ceeded last February in having Congress enact a law appropriating 
annually, until the work is done, $500,000 a year for the purchase 
of homes for our ambassadors abroad. I am not going to revert to 
that old subject, but I only touched upon it because I thought Mr. 
Gates wished me to. And I only wanted to thank the Business 
League for what they did then, and say that I hope the omen of 
appearing under their auspices will give the views that I am about 
to give utterance to as much currency and have as much beneficial 
result as the old campaign had. 

I sometimes think that we in the East are as far behind the 
West as England is behind us. I am reminded of a little story told 
in England not long ago that shows how much England is behind 
even the Atlantic coast. When a woman who owned her little store 
said to an American boy who was visiting her: "Jimmie, every- 
thing depends upon yourself to make your way in life. When I 
was a young woman I went to work here in London for $3 a week, 
and at the end of a few years I owned the whole store." Jimmie 
said: "You cannot do that in New York. They have cash regis- 
ters there." (Applause.) 

In the panic of 1893 I was actively engaged, and was then as 
I am now, a member of the New York Stock Exchange. I was 
called on the telephone by one of the largest savings banks be- 
tween New York and Boston, and the President said to me : "Mr. 
Jones, we are having a run on our bank. We will send you to- 



NATIONAL BUSINESS CONGRESS 191 

night 500,000 Governments, and we want you to send us the 
money. We don't want any checks ; checks are no good." 

Currency at that time was selling at a premium of about 5 per 
cent. I said : "Hold your bonds for further instructions, till I see 
what I can do." I sent out representatives among the National 
Banks of the city, who I felt should be buyers of these bonds at 
a price, and offered them to them. In the entire City of New York 
I was only successful in getting an order, and that about 20 points 
under the last quoted price, for 50,000 of those 500,000. Mean- 
while I had had my correspondents go over the Boston market and 
they found they could sell them in Boston at a very low price and 
buy the currency there for about 5 per cent premium. I called up 
the banker and told him not to ship the bonds to New York, but 
to ship them to Boston; that they would ship him the currency the 
next day. The thought was then germinated in my mind when 
we had a currency founded on Government bonds ; when there was 
seven hundred and odd millions of it out, when a bank had a run 
on it and it had the Government bonds on which that currency was 
issued, and it couldn't get the National Banks who had the right to 
get the currency to get it and give it to them, and they could not 
get it themselves, I thought there was something wrong. It is 
only recently since there has been so much agitation, and neces- 
sary agitation, to prove the currency question, that I again gave 
thought to this idea, and from that experience, what I am going to 
say to you has sprung. 

All economists and financiers agree in the opinion that the cur- 
rency of the United States lacks elasticity. It does not expand and 
contract with the rising and falling tides of trade. The necessity 
of some change in the banking system which will provide a more 
elastic currency has been urged upon Congress officially and unof- 
ficially for twenty-five years. 

Most of those who urge a change evidently believe that no addi- 
tional elasticity can be given to a currency based solely upon the 
security of government bonds. They think that it would be desir- 
able if possible to abandon the system by which National Bank 
Notes are issued upon the pledge of government bonds as security. 
When they endeavor to agree upon a substitute for the present 
National Bank notes secured by bonds of the United States there is 
considerable difference of opinion as to what should be done. In 
general their recommendations provide in one form or another for 



192 NATIONAL BUSINESS CONGRESS 

an issue of bank notes secured under suitable regulations and re- 
strictions by the assets of the banks issuing the notes. This form of 
note issue is conveniently designated as "asset currency'' and it will 
be equally convenient for the purposes of this article to refer to a 
currency secured by government bonds as "bond currency." 

The only progress which has been made in National legislation 
in the direction of the adoption of "asset currency" was contained 
in the Act of May 30, 1908. This was passed under the stress of 
fear induced by the recent memory of the panic of 1907 when there 
was a practical suspension of currency payments by banks through- 
out the country, and when currency was bought and sold as a com- 
modity in the principal money centers. This law authorized the 
issue of notes not secured by United States bonds in two ways. 

Any National Bank which fulfills certain requirements may 
secure authority to issue notes secured by bonds of any State of the 
United States or of any City, Town, County or other municipality 
or district in the United States which has been in existence for ten 
years previous to such deposit and has not defaulted during that 
period in the payment of any part of the principal or interest of any 
funded debt and whose net funded debt does not exceed 10% of 
the assessed valuation of its taxable property. 

The law further provides for the formation of national cur- 
rency associations by not less than ten National Banks, each having 
an unimpaired capital and a surplus of not less than 20% and with 
an aggregate capital and surplus of at least $5,000,000. Any such 
currency association acting on behalf of any one of its members may 
upon its fulfillment of certain requirements obtain authority from 
the Secretary of the Treasury for an issue of additional notes to the 
currency association on behalf of its members secured by the de- 
posit of any securities, including commercial paper. 

The essential feature of one method is that notes may be 
"secured by the deposit of bonds other than bonds of the United 
States." The fact that the "other bonds" must be State or munici- 
pal bonds makes this new currency a "bond currency." The only 
difference is that the selection of bonds is not limited to United 
States bonds, but is extended to State and municipal bonds. The 
proposed currency is, therefore, a State and municipal "bond cur- 
rency" and not a United States "bond currency." 

The essential feature of the other method is that notes can be 
issued upon the security of commercial assets. The security for the 



NATIONAL BUSINESS CONGRESS 193 

notes may be "any securities, including commercial paper" but notes 
cannot be issued on the security of commercial paper to a greater 
extent than 30% of the unimpaired capital and surplus of the issu- 
ing bank nor to exceed 75% of the cash value of the securities or 
commercial paper deposited except in the case of State and munici- 
pal bonds, upon which notes may be issued to the extent of 90% of 
their market value. 

Judged by the experience of the past the most objectionable 
feature is the authority to issue notes to circulate as money, based 
on the pledge of State and municipal bonds. The experience of 
the country under the State Banking system from 1837 to 1863 
demonstrated the insecurity of bank notes issued upon the pledge of 
such securities. The permission to use State and municipal bonds 
as security for circulation multiplies the number and character of 
the governments upon whose credit the money of the people is de- 
pendent for its value. Under our system of government there is 
no practical method to prevent the repudiation of bonds by State 
and municipal governments. A currency based on State and muni- 
cipal bonds can be no more elastic than one based on United States 
bonds. The addition of State and municipal bonds merely adds an 
inferior bond currency and gives no more elasticity to the currency. 

The notes authorized by this law have been designated as 
"emergency currency" because it was not intended that they should 
be issued except in times of panic or when money is in great de- 
mand. As a means of preventing their issue, except at times when 
rates of interest are very high, and compelling their retirement when 
the emergency is past, the law provides for a tax upon the notes 
for the first month of their issue at the rate of 5% per annum and 
afterwards an additional tax of 1% per annum for each month until 
a tax of 10% per annum is reached, and thereafter an annual tax 
of 10%. 

Currency associations have been formed in various parts of the 
country pursuant to the provisions of this law, but up to the present 
time no notes not secured by United States bonds have been issued, 
either by the currency associations or by the National Banks. The 
existence of these provisions for "emergency currency" does not 
satisfy the demand for a modification of the permanent currency 
system for use in ordinary times. The temporary character of the 
legislation is shown by the fact that the operation of the law expires 
by limitation on the 30th day of June, 1914. 



194 NATIONAL BUSINESS CONGRESS 



The difference of opinion in regard to the modifications that 
should be made in our present currency system in order to make it 
more elastic and responsive to the needs of business may be put in 
two classes: differences of opinion as to the intrinsic merits of the 
different plans proposed, and differences of opinion as to the politi- 
cal difficulties which will lie in the way of their adoption. All stu- 
dents of the problem probably agree that it will be difficult to secure 
at any early date, the passage of a law which will abolish entirely 
the present United States "bond currency" and substitute in its place 
any system of "asset currency." The National Bank notes secured 
by United States bonds, have stood the test of war and panic and 
hold a firm place in the confidence of the American people and the 
world. 

The existence of this political obstacle to a fundamental change 
in the character of the security back of our National Bank currency 
raises the question whether something cannot be done to make a 
United States "bond currency" more elastic and at the same time 
leave the field open for the adoption of a plan for the issue of "asset 
currency" whenever an agreement can be reached as to a safe and 
scientific system. Every suggestion for the accomplishment of this 
result is to be welcomed in the interests of the public welfare. In 
this spirit the author of this article proposes a plan for the issue of 
currency secured by United States bonds which, in his opinion, will 
render that portion of the circulating medium of the United States 
more elastic than at present without, in any way, interfering with 
the advocacy and adoption in future of any proper plan for the issue 
of "asset currency." 

The substance of this plan is that the right to receive notes 
to circulate as money secured by the deposit and pledge of United 
States bonds shall not be limited to National Banks, but shall be 
conferred upon any person who owns United States bonds. 

Why should John Brown, because he incorporates himself as 
the John Brozvn National Bank with a capital of $100,000 be allowed 
to get $100,000 in currency from the government on the deposit of 
government bonds to that amount, when John Brown, as an indi- 
vidual, or as the John Brown Dry Goods Co., or the John Brown 
Plow Factory, or the John Brown Trust Co., or the John Brown 
State or Savings Bank, cannot do so upon the pledge of the same 
bonds? 



NATIONAL BUSINESS CONGRESS 195 

The only answer to this question is that practically the exclu- 
sive right to issue notes to circulate as money is conferred by law 
upon National Banks for reasons which arose out of the Civil War. 
These reasons were the desire for a uniform currency, controllable 
in amount by the National Government and receivable for taxes by 
the National Treasury; the creation of a permanent market for a 
large amount of United States bonds and the consequent improve- 
ment of the National credit ; the creation of a large number of finan- 
cial institutions under national control widely distributed over the 
country which could serve as depositaries for government funds 
and act. as fiscal agents of the Treasury and distribute bonds to sub- 
scribers; and the increased guaranty that in future there would be 
fewer banks capable of furnishing credit to rebellious states. 

The necessity for the creation of a market for bonds through 
the medium of National Banks no longer exists. The preservation 
of the system of National Banks as Government depositaries and 
fiscal agents of the Treasury, is not dependent on their exclusive 
privilege to issue notes secured by United States bonds, and the uni- 
formity of the currency will be equally safeguarded under the pro- 
posed plan of the issue of notes to any person or corporation upon 
the pledge of United States bonds. The security behind the cur- 
rency, in either case, is exactly the same, and if the National Bank 
currency is now good, the same currency will be equally good when 
issued in exchange for United States bonds deposited by an indi- 
vidual or a trading or manufacturing company. 

Theoretically State banks have the right to issue notes to cir- 
culate as money in accordance with the varying requirements of the 
laws of the different states. Prior to the establishment of the Na- 
tional Bank system, they exercised this right. The system was bad 
because of its lack of uniformity and the resulting inequality in the 
value of the notes. Congress rendered the exercise of the right to 
issue notes by State Banks practically impossible by imposing upon 
such notes a tax of 10% per annum. Under the proposed plan 
State banks as well as National would be put on the same status as 
any individual or trading or manufacturing company — all would 
have the same right to secure currency upon the pledge of United 
States bonds. 

This system of currency could be worked out in practical form 
by having Congress enact a law making all United States bonds con- 



196 NATIONAL BUSINESS CONGRESS 



vertible into currency and reconvertible into bonds under the follow- 
ing plan : 

i. Any person, firm or corporation may deposit bonds in any 
amount with any sub-treasury of the United States, and receive in 
lieu thereof circulating notes to the amount of the face value of the 
bonds so deposited. 

2. Any person, firm or corporation may at any time return to 
any sub-treasury any such circulating notes in amounts of $100 or 
any multiple thereof and receive in exchange therefor bonds to thp 
amount of the face value of the notes so returned. 

5. Interest on the bonds shall cease while the circulating notes 
are outstanding, but shall commence again when the notes are re- 
turned and the bonds are again issued. 

4. All future issues of United States bonds shall be in denomi- 
nations of $100 and multiples thereof and allotted at par to the 
smallest subscribers first. 

These are the essential features of the plan. The details can be 
worked out as a matter of legislation and administration. 

All future sales of bonds at par to the smallest subscribers first 
will overcome the existing discouragement to small bidders, who are 
puzzled by the fractional premium that may be necessary to secure 
them and consequently do not bid at all. 

This method of issue and allotment will establish a direct mar- 
ket for the bonds with the people and remove the government from 
the hands of syndicates. Undoubtedly large financial institutions 
can apply for small allotments in the names of employes, but in 
view of the size of the bond issues, this process of acquiring large 
blocks of bonds will not seriously deprive the general public of the 
chance to get them. 

No government can issue and sell bonds unless somebody makes 
a profit from the purchase. It is in every way desirable that this 
profit should be made by the general public, instead of being divided 
between the government and syndicates as at present. 

The Nation would derive more permanent benefit by having the 
general public make the profit and placing its bonds directly in their 
hands than by getting a trifling profit by selling the bonds at a pre- 
mium under the present system which makes the National Banks 
practically the only market for United States bonds. 

The total interest-bearing bonded debt of the United States 
outstanding on October 31, 1911, was $963,349,390. Bonds to the 



NATIONAL BUSINESS CONGRESS 197 

amount of $714,170,320 (74%) were on deposit with the Treasurer 
of the United States to secure circulation, and $38,791,700 (4%) 
were on deposit with the Treasurer of the United States to secure 
deposits of public moneys in National Banks. In all $752,962,020. 
Thus 78% of the entire interest-bearing bonds of the United States 
were held by National Banks on October 31, 1911, either to secure 
the issue of bank notes or to secure deposits of public money. 

In addition to these amounts official reports to the Comptroller 
of the Currency show that the National Banks usually hold about 
$10,000,000 (1%) United States bonds as investments, and that 
about $18,000,000 (2%) are held as investments by State Banks, 
savings banks, private banks and loan and trust companies. This 
leaves about $182,500,000 bonds — less than 19 per cent of the entire 
interest-bearing bonded debt of the United States, available for in- 
vestment to persons other than banks and financial institutions. 
There is no means of knowing accurately to what extent this small 
remnant of bonds is held by insurance companies and other institu- 
tions which do not report to the Comptroller of the Currency. It is 
clear that the amount of United States bonds held by individual in- 
vestors in the United States, is ridiculously small. The system 
which brings about this result is short-sighted on the part of any 
government, and particularly on the part of the government of a 
democracy. 

The strongest opponents of any government are transformed 
into supporters by the ownership of its bonds. 

This method is pursued by other governments and tends to 
strengthen any government with its people. 

The bonds should bear 3% interest. At the present time no 
government in the world, unless it creates a fictitious market for its 
bonds as ours has done, can borrow for less than 3% and have its 
bonds sell above par. Any rate below this is forced by law and paid 
for by other exclusive advantages and cannot be depended upon in 
time of trouble or emergency. Forced by a fictitious market, ours 
is the only government whose bonds sell on a lower interest basis 
than three per cent. 

All bonds should be convertible into currency at the option of 
the holders, who should have the right at any time to send or deliver 
his bonds to the nearest sub-treasury and receive in exchange there- 
for, currency equal in amount to the par value of his bonds. Inter- 
est on the bonds should be suspended while the bonds are on deposit. 



198 NATIONAL BUSINESS CONGRESS 

When the depositor no longer wishes to use the currency, he should 
have the right to return the same amount of currency and receive 
back his bonds. Interest on the bonds should be adjusted and then 
again begin to run. 

The bonds in size may be comparatively small. Not much 
larger than Bank Notes. 

This process of conversion of bonds into currency and recon- 
version of currency into bonds, should be performed as often during 
the life of the bonds as any holder desires. Provision could be 
made for the registration of bonds in the names of holders who 
desire it. 

All sub-treasuries should keep on hand a supply of currency 
exchangeable for bonds and bonds exchangeable for currency, just 
as the postoffices now keep on hand money orders exchangeable for 
cash and cash exchangeable for money orders. Under a simple sys- 
tem of books the exchanges can be made with practically little, if 
any, more expense than the postoffice department now incurs in 
issuing money orders and taking savings deposits. 

The profit that the government would make by suspending the 
payment of interest on the bonds, while the currency is outstanding, 
would more than pay for the printing of the currency, apart from 
the profits on bonds and currency that would be lost and destroyed 
in the course of active circulation. The gain to the government 
on account of National Bank notes lost or destroyed and conse- 
quently never presented for redemption, has been estimated to be 
two-fifths of one per cent upon the total currency issued. Under 
the present system, the National Banks receive the interest on the 
bonds at the same time that they either keep or loan the principal 
in the form of currency. The plan proposed does not contemplate 
the withdrawal of the present privilege from National Banks so far 
as existing issues of bonds are concerned. Any increased cost to 
the government in the administration of the plan in reference to new 
issues of bonds would be more than met by the saving of interest. 

This plan will largely remove the pressure on the banks by the 
people, and every business man can carry a certain percentage of his 
assets in these bonds, knowing that when he needs money he can get 
it by simply sacrificing his 3% interest. It will not be necessary for 
him either to sell securities at a loss in a low market or borrow 
money at a high rate of interest in time of stringency, which is the 
time when securities must be sold at the greatest loss and money bor- 



NATIONAL BUSINESS CONGRESS 199 

rowed at the greatest cost. All incentive to the hoarding of cur- 
rency tending to create panic and high interest rates will vanish. The 
plan will operate against the control of money by concentrated bank- 
ing capital and will tend toward establishing a fixed low rate of in- 
terest, which is so desirable to aid in bringing the financial center of 
the world to this country. 

When the farmers of the West and South shall have invested 
their surplus in government bonds and need money, with which to 
harvest their crops and send them to market, they will largely be 
independent of the local banks. Every such farmer can send his 
bonds to the nearest sub-treasury for deposit and promptly secure 
currency in exchange. The only cost to him for the currency is 
the surrender of the 3% interest per annum on his bonds during the 
time that he keeps the currency. 

The State Banks in the West and South, when crops are to be 
harvested and moved to market, can pursue the same plan and 
secure a large volume of currency each recurring season for the 
accommodation of their customers. 

When manufacturers and merchants wish to lay in a new stock 
of raw material and merchandise or to carry manufactured goods 
until sold, they can secure the currency they need by the sacrifice of 
the interest on their surplus if this is invested in United States 
bonds. 

Each farmer, banker, manufacturer or merchant, when he has 
harvested his crops, collected his loans or sold his merchandise, can 
return his currency or its equivalent in money to the sub-treasury 
where the bonds are deposited, and receive back his bonds and again 
have his surplus earning interest at the rate of 3% in the safest 
investment of the country, and at no expense for brokerage or other 
charges and at no loss of any part of his investment. 

Every farmer and business man can thus be encouraged to carry 
as large a part as possible of his surplus assets in government bonds, 
knowing that whenever he needs money he can get it by the sur- 
render of the interest on his investment, and will not have to sell 
something in an emergency on a falling market, or borrow from his 
bank at high rates of interest. 

By this plan hundreds of thousands of people would own 
United States bonds who do not do so now, and would by reason of 
that fact be more interested in the good conduct of the government 
than they are now. The government would always have a market 



200 NATIONAL BUSINESS CONGRESS 

for its bonds among its own citizens, as France has whenever it has 
any to offer. 

In the opinion of the author this plan would fit into the present 
currency system of the United States without any disturbance and 
would make the currency more elastic and would be advantageous 
both to the government and to the people. The two forms of pres- 
ent paper money which would be affected by the adoption of this 
plan are the National Bank notes and the greenbacks. 

NATIONAL BANK NOTES. 

At the close of business on October 31, 1911, there were in 
operation 7,331 National Banks with an authorized capital of $1,- 
032,632,135. On the same date, United States bonds to the amount 
of $714,170,320 were on deposit with the Treasurer of the United 
States as security for the issue of National Bank notes. Thus 
seventy-four per. cent (74%) of the entire interest bearing bonded 
debt of the United States on October 31, 1911, was held by the Na- 
tional Banks as security for the issue of notes to circulate as money. 

The profit obtained by the banks on this circulation would be a 
matter of simple calculation if the bonds were always obtainable at 
par and the charges of the government for taxes, expenses and the 
sinking fund were uniform for all bonds and notes. The notes is- 
sued by the banks would have the same loanable value as the origi- 
nal capital used to purchase the bonds and the interest obtainable on 
the notes, when loaned or invested by the bank, would be exactly the 
same as the bank would have obtained on the loan or investment of 
its original capital. In that case the profit to the banks on the trans- 
action would be represented by the difference between the interest 
on the bonds and the charges of the government for taxes, expenses 
and sinking fund. But the calculation of profit is not thus simple. 
The price of the bonds varies from month to month and day to day 
and the charges of the government are not uniform. The Comp- 
troller of the Currency makes calculations from month to month to 
show the actual profit on the circulation based on the average net 
price of the bonds of different classes for the current month. No 
such calculation is made for the three per cent bonds of the loan of 
1908, for the reason that the government is able to call them at any 
time from now to August 1, 1918. No computations based upon 



NATIONAL BUSINESS CONGRESS 



201 



the value of these bonds can correctly be made, because of this un- 
certain date of maturity. They are at a premium. Their average net 
price is approximately \0\y 2 . If any of these bonds pledged for 
circulation were called for payment at par, the bank would lose the 
premium. 

The method of computation for the 2% consols of 1930, the 
4% loan of 1925 and the 2% Panama Canal bonds is shown in the 
marginal table and explained by the Comptroller of the Currency in 
the following language : 

"Money is assumed to be worth 6% and the measure of profit 
is the difference between the net receipts from the circulation loaned 
at 6% and interest that would be obtained on the cost of the bonds 
loaned at the same rate; in other words, from the interest received 
on the bonds at the rate provided therein, and the interest on circu- 
lation loaned at 6% are deducted the taxes on circulation, expense 
incident to the obtaining of circulation; i.e., plates, redemption 
charges, etc., together with the sinking fund, and from the difference 
is deducted the interest on the cost of the bonds to show the profit." 

Profit on National Bank circulation based on a deposit of $100,- 
000. United States Consols of 1930; Loan of 1925 and Panama 
Canal Loan at the average net price for the last month covered by 
the last annual report of the Comptroller of the Currency : 



Circulation Interest 
Cost of obtain- on 

bonds able bonds 

Consols of 1930. . . .$101,005 $100,000 $2,000 

Loan of 1925 115,380 100,000 4,000 

Panama Canal Loan 100,920 100,000 2,000 



Interest 
on cir- 
culation 

@6% 

$6,000 
6,000 
6,000 



Gross 
Receipts 

$ 8,000 

10,000 

8,000 



Tax 



Ex- 
penses 



> 500 $62.50 

1,000 62.50 

500 62.50 



Sinking 
Fund 

Consols of 1930. . . .$ 27.58 

Loan of 1925 688.45 

Panama Canal Loan 15.17 



Total 
De- 
ductions 

$ 590.08 

1,750.95 

577.67 



Net 
Receipts 

17,409.92 
8,249.05 
7,422.33 



Interest 
on cost of 
bonds at 

6% 

$6,060.30 
6,922.80 
6,055.20 



Profit on circula- 
tion in excess of 
Q% on investment 
Amount Per cent 

$1,349.62 1.336 
1,326.25 1.149 
1,367.13 1.355 



The bonds on deposit with the Treasurer of the United States 
as security for National Bank notes on October 31, 1911, were dis- 
tributed among the different classes as follows : 2% Consols of 1930 
—$593,006,600; 3% Loan of 1908— $18,199,380; (omitted below) 
4% Loan of 1925— $22,854,300 ; 2% Panama Canal Loans— $80,- 



202 NATIONAL BUSINESS CONGRESS 

110,040. The following table will show the profits obtainable by 
the National Banks on circulation in one year, based upon the 
amount and distribution in classes of bonds deposited on October 
31, 1911, and on the average profits shown by the preceding calcu- 
lations : 



Amount on deposit Profit per Total 

to secure circu- annum on each profit per 

Class of bonds lation $100,000 annum 

Consols of 1930 $593,006,600 $1,349.62 $8,003,335.67 

Loan of 1925 22,854,300 1,326.25 303,105.15 

Panama Canal Loan 80,110,040 1,367.13 1,095,208.38 

Total $9,401,649.20 



According to these computations of the Comptroller of the Cur- 
rency, the National Banks of the country make or have the oppor- 
tunity to make an annual profit of approximately $10,000,000 out 
of the issue of notes secured by the deposit of bonds over and above 
•6% interest on the capital invested in the bonds and over and above 
all taxes and expenses incident to the issue and redemption of the 
notes. All such charges for taxes and expenses have been deducted 
prior to the determination of the net profits shown by the above 
tables. This $10,000,000 is paid out of taxes collected by the Gov- 
ernment from the people in some form. For this profit of $10,000,- 
000 per annum, the National Banks at the present time render no 
service to the Government or the people of the United States. This 
$10,000,000 per annum could be saved to the Treasury of the United 
States on the issue of notes to the same amount directly to the 
people under the plan proposed by me. This saving could not be 
entirely effected at once, because the immediate application of the 
plan to existing issues of bonds, now so largely held by National 
Banks, is not advocated. 

Even if the proposed system necessitates some increase in the 
clerical expenses of the sub-Treasuries at the points where the notes 
are distributed to the people, this increase ought to be more than 
offset by the decrease in the clerical and administrative expenses of 
the bureaus at Washington where the notes are prepared and dis- 
tributed to the National Banks. 

On October 31, 1911, there were 7,331 National Banks in the 
United States with each of which it was necessary to conduct cor- 



NATIONAL BUSINESS CONGRESS 203 

respondence and keep accounts ; for each of which it was necessary 
to make different plates and print different notes for each denomina- 
tion of note issued by it, and to each of which it was necessary to 
distribute notes when printed. National Bank Notes are author- 
ized in eight denominations of five, ten, twenty, fifty, one hundred, 
five hundred, one thousand and ten thousand dollars. 

Eight times 7,331 makes a possible 58,648 plates which may 
have been necessary for the issue of National Bank notes to the 
National Banks in operation on October 31, 1911, under the present 
system. Under the system proposed by me, all notes of each de- 
nomination will be the same throughout the United States, and there 
will be no expense of engraving the names and designs of 7,331 
different banks. This makes ten engraved plates theoretically pos- 
sible under the proposed system, as against 58,648 under the present 
system. 

Practically ten plates will not be sufficient by reason of the wear 
and tear on the plate in the engraving of a larger number of notes 
of each denomination, but this is offset by the changes in plates each 
year under the present system, due to the organization of new banks 
and changes of names of the old ones. During the year ending 
October 31, 1911, charters were issued to 214 new National Banks 
and the names of 9 existing National Banks were changed. Notes 
in eight denominations for 223 banks made a possible 1,784 new 
plates to be engraved during 1911 for these 214 new banks and 9 old 
ones with change of names. 

It is true that as a matter of bookkeeping expenses for plates 
are charged to and paid by the banks. But all such expenses have 
been deducted from the interest on the bonds prior to the determina- 
tion of net profits shown by the above tables. Practically, there- 
fore, all such charges for expenses are paid out of taxes collected 
by the Government from the people in some form. These facts 
show that every consideration of economy in expenditure and saving 
of profits to the Government or to the people, is on the side of the 
proposed plan of notes to be issued directly to the people. 

Complaint is made that the National Bank currency is not 
elastic; that it does not contract and expand with the demands of 
trade and business; that its failure to contract and expand renders 
the currency redundant when money is "easy," and scarce when 
money is "tight." The reasons for this lack of elasticity are not 
difficult to find. The present National Bank currency is slow to ex- 



204 NATIONAL BUSINESS CONGRESS 

pand because of the delay, trouble and expense necessary to have it 
issued. The urgent demand may be over before the bonds can be 
deposited and notes engraved and delivered. It is slow to contract 
because of the same difficulties and also because there are no induce- 
ments to its retirement. There is on the contrary every advantage 
to the National Banks not to retire their notes when money is easy 
and the currency redundant. If they cannot loan their notes to ad- 
vantage, they could not loan their capital if they had it. The sur- 
render of the notes will only enable them to get back their bonds, 
from which they cannot get more than the interest they receive, 
unless they sell them. If they sell them, they cannot lend the capital 
released by the sale on any better terms than the currency which 
they have surrendered. By keeping the currency even idle, if neces- 
sary, they retain the interest on their bonds and have the chance to 
loan their currency whenever and at whatever rates they can. 

These influences and forces would all be on the side of elasticity 
under the new system. The notes would always be ready and could 
be easily and quickly issued and retired. The inducement for their 
issue would be that money was in demand for purposes of trade and 
commerce and worth more than the interest on the bonds. The in- 
ducement for their retirement would be that money was easy and 
worth less than the interest on the bonds. The facility of the ex- 
change of notes for bonds and bonds for notes and the suspension of 
interest on the bonds while the notes were in circulation, would pro- 
duce the very elasticity which the present system lacks. 

GREENBACKS. 

The extension of the plan to another branch of our paper 
money would remove the rigid inelasticity of the United States notes 
commonly known as "greenbacks." These were issued during the 
Civil War in payment of the expenses of the Government. They 
are mere promises of the Government to pay on demand a stated 
number of dollars. They were made legal tender in order to force 
their circulation at a time when the credit of the Government was 
low. 

Of the large amount issued during the Civil War, many were 
retired and cancelled prior to May 31, 1878, when their further re- 
tirement and cancellation was prohibited by law. The amount then 
and now outstanding was and is $346,681,016. Gold to the amount 
of $150,000,000 is held in the Treasury of the United States as a 



NATIONAL BUSINESS CONGRESS 205 

Reserve Fund for their redemption and for the redemption of $3,- 
138,000 of Treasury notes of 1890. The law establishing the pro- 
posed plan of United States bond currency could bring the green- 
backs within its provisions. They could be made exchangeable for 
bonds in the same manner as National notes. Once bonds were is- 
sued the greenbacks could be retired and cancelled and when the 
bonds came back for deposit, the new National notes could be issued 
in their place. This would produce a uniform currency so far as it 
is based on the faith and credit of the Government and not on the 
deposit of gold and silver in the Treasury of the United States or on 
the assets of banks. 

Whenever you touch the greenbacks, you raise the question of 
their quality as legal tender in payment of public and private debts. 
The constitutionality of making anything but gold or silver legal 
tender, was the subject of long controversy in the courts and its 
desirability is still the subject of permanent controversy in the minds 
of financiers and economists. The legal question has been settled 
by the Supreme Court of the United States, which has held that Con- 
gress has the power to declare National notes legal tender in the 
payment of public and private debts. 

As an academic question, it may be conceded that nothing ex- 
cept gold should be made a legal tender in the payment of debts so 
long as it is the standard of value. Theoretically, this is sound, but 
practically it is not as sensible as it is sound. The people of the 
United States prefer to use paper money. This is shown by the fact 
that on October 31, 1911, there were gold certificates to the amount 
of $997,062,669 outstanding and in circulation. The gold coin and 
bullion for which these certificates have been issued is on deposit, 
dollar for dollar, in the Treasury of the United States. It lies there 
in the vaults because the people do not wish to handle it and carry 
it, but prefer the paper evidences of its existence. There is no 
incentive to the deposit of gold and the issue of certificates in place 
of it, except that of convenience. Under the present system gold 
coin is legal tender, but gold certificates are not. 

In the practical conduct of business, it is necessary that there 
should be established by law some medium of exchange which a 
debtor can conveniently secure and compel his creditor to accept. 
Contracts in writing may be drawn to provide for payment in any 
particular money or standard of value, but indebtedness growing out 
of ordinary transactions is not expressed in writing, and it is neces- 



206 NATIONAL BUSINESS CONGRESS 



sary for the law to prescribe some medium of exchange which shall 
be accepted in payment by the creditor when tendered by the debtor. 
In view of the inconvenience of making gold coin the sole legal 
tender in payment of debts in the United States, there is substantial 
reason for giving that quality to National notes. This, however, is 
a matter of opinion, and does not bear on the merits of the proposed 
system of National notes. 

NO INFLATION OF THE CURRENCY. 

The proposed plan may be unthinkingly criticised upon the 
ground that it opens the door for the inflation of the currency with- 
out limit in amount and with no provision for its redemption in 
gold. 

We are not now proposing a new and scientific system of cur- 
rency. We are dealing with the established system of currency 
which exists in the country at the present time. The new plan must 
be judged by comparison with the present situation. 

On October 31, 1911, there were 7,331 National Banks with a 
total capitalization of $1,032,632,135. On the same day the total 
outstanding bonds of the United States which could be used for cir- 
culation, amounted to $913,317,490 — less than the combined capital 
of the National Banks by the sum of $119,314,645. In addition to 
the bonds which could be used to secure circulation, there were out- 
standing $49,990,000 Panama Canal 3% bonds of 1911 and $41,900 
Postal Savings 2 J / 2 % bonds from which the circulation privilege 
had been withheld. The National Banks, therefore, were able to 
secure authority to issue National Bank notes, secured by United 
States bonds, to the total amount of $913,317,490. They had not 
availed themselves of their full privilege in this respect. The total 
amount of United States bonds deposited to secure circulation on, 
October 31, 1911, was $714,170,320. The National Banks, there- 
fore, could have issued about $200,000,000 more National Bank 
notes than they had qualified themselves to issue on that date — over 
25% of the total National Bank circulation, which clearly shows that 
many National Banks did not consider their present privilege suf- 
ficiently valuable to cause them to give to the people as much cur- 
rency within $200,000,000 as they might have done. 

(The foregoing paragraph does not take into consideration the 
fact that the Act of May 30, 1908, authorizes a further issue of 
Notes by the National Banks of not over $500,000,000. Hence, on 






NATIONAL BUSINESS CONGRESS 207 

October 31, 1911, the National Banks could have issued Notes ag- 
gregating $1,413,317,490, of which $913,317,490 could have been 
secured by U. S. bonds and $500,000,000 by State and Municipal 
bonds and other assets.) 

If the proposed plan had been in force on the same day, the 
amount of National bond notes that could have been issued under 
the new plan would have been the same as the amount of National 
bank notes that could have been issued on the security of United 
States bonds under the present system with the addition of $49,990,- 
000, Panama Canal 3% bonds of 1911, and $41,900 Postal Savings 
Bonds; in all an addition of $50,031,900. 

Any criticism of the proposed plan for its lack of limit as to 
the amount of notes that may now be issued, applies with equal 
force to the present system, for although the present issues of 
United States bonds available for circulation do not equal by $119,- 
314,645 the present combined capital of the National Banks, the law 
of ipo8, which gives National Banks the right to issue notes against 
deposits of state, municipal and other bonds, raises the limit of the 
possible issue of National Bank Notes under the present system to 
the combined "capital and surplus" of the National Banks, now 
about $1,650,000,000, with the $500,000,000 limit for "emergency 
currency" above referred to. 

REDEMPTION IN GOLD. 

The question of redemption in gold presents a more intricate 
problem, but a critical analysis of the facts will demonstrate that 
under the present system the redemption in gold of National Bank 
notes and greenbacks depends as a last resort upon the ability of the 
National Government to sell bonds to procure the gold. National 
bank notes are payable in lawful money of the United States. Law- 
ful money of the United States means gold and silver coin and 
greenbacks. The National Banks are required to maintain in the 
Treasury of the United States a current redemption fund in lawful 
money of the United States equal to 5% of the circulation out- 
standing. Notes presented to the Treasury of the United States 
for redemption are paid from this fund. When paid from this fund 
they are presented to the bank for payment. If the notes are not 
paid by the bank the Government must sell the United States bonds 
which have been deposited to secure their payment in order to get 



208 NATIONAL BUSINESS CONGRESS 

the lawful money — gold and silver coin and greenbacks — with 
which to pay them. 

If paid in silver the law of 1900 makes it the duty of the Secre- 
tary of the Treasury to maintain the parity between gold and silver. 

If the National bank notes are paid in greenbacks only one step 
is necessary to get gold. The greenbacks are payable in gold. 
$150,000,000 in gold is held in the Treasury of the United States as 
a reserve fund from which to pay them on demand. If the fund is 
exhausted, the Secretary of the Treasury has authority to sell bonds 
to replenish it. This was done on four different occasions during 
the second administration of President Cleveland. 

The result is the same in both cases. The ultimate resource for 
the maintenance of redemption of the National Bank notes and 
greenbacks in gold is the reserve fund of $150,000,000 in gold in the 
Treasury, backed by the authority and ability of the National Gov- 
ernment to sell bonds to provide more gold when needed. This! 
reserve fund, backed by the authority of the National Government 
to sell bonds, was the basis for redemption in gold of $346,681,016 
of greenbacks and $714,170,320 of National bank notes issued and 
authorized to be issued on October 31, 1911. 

The same reserve fund can be maintained and the same ability 
to sell bonds and secure gold will exist under the new system. 

SIMPLICITY AND ADAPTABILITY. 

The proposed plan does not make a radical change in the char- 
acter of the existing currency, nor does it in any way, deprive the 
people of any of the benefits that can be derived at present or which 
may be derived in future from the National Banking system. 

The National Banking system gave to the country two of the 
greatest qualities of any currency — security and uniformity. The 
old system of discrimination between different bank notes ceased 
when every dollar in circulation rested on the same basis : the credit 
of the National Government. The necessity of paying high rates of 
exchange on currency or surrendering the notes of distant banks at a 
heavy discount ceased when every note became as good in one part 
of the Union as in another. 

Federal supervision and examination stopped the creation of 
fraudulent banks and imposed such restrictions upon their activity 
and supervision over their management, that National bank failures 
have been comparatively few. These great benefits — security and 



NATIONAL BUSINESS CONGRESS 209 

uniformity of note issues, saving of exchange and safety, are almost 
inherent parts of a National system, and a National system of banks 
under Federal supervision is essential in order to produce them. 

At the present time the real security back of the National bank 
notes are the United States bonds. United States bonds are simply 
the promise of the Government to pay at some time in the future. 
Greenbacks are simply the promise of the Government to pay on de- 
mand. The real security back of the present National bank notes 
and the present greenbacks is the credit of the Government. Under 
the proposed new plan, the security for all the new notes will be the 
bonds of the United States ; its promise to pay at some time in the 
future ; its credit. 

Many financiers and economists criticise the soundness of a 
currency based upon the credit of the Government under any cir- 
cumstances, but such a currency exists as a part of our monetary 
system at the present time, and the proposed plan does not increase 
or decrease the possible amount of currency based on the credit of 
the Government, unless the outstanding bonds exceed the combined 
capital of the National Banks, which is not now the case. The only 
change proposed is that this currency shall be obtainable directly by 
the people of the United States, and that the right to receive notes 
upon the pledge of United States bonds shall not be an exclusive 
privilege granted only and for no good reason to the National 
Banks at an annual expense of about $10,000,000 to the taxpayers. 

This change in the law will not interfere with the adoption of 
any safe and scientific system of banking currency based upon 
assets. In fact, the separation of the business of issuing currency 
based upon the credit of the Government from the National Banks 
and placing it in the hands of the sub-treasuries, will probably clear 
the field and facilitate the adoption of such a system of " 'asset cur- 
rency" for the National Banks. 

ITS GENERAL ACCEPTABILITY. 

If the subject is examined free from preconceived prejudices, 
there appears to be no substantial ground of opposition. 

Those interested in the subject may be divided into f out- 
classes : 

(A) The Government. 

(B) The National Banks. 



210 NATIONAL BUSINESS CONGRESS 

(C) State Banks, Savings Banks, Trust Companies and Pri- 
vate Banks. 

(D) Individuals. 

There appears to be no reason why any of these groups should 
oppose the prompt adoption of the proposed plan. 

(A) The government will derive a great advantage in creating 
and maintaining a market among the people for United States 
bonds, which does not now exist. 

(B) The National Banks can have no sound reason for ob- 
jecting to the proposed plan. It does not work any injustice to 
them or injure their present investments in United States bonds. 
So far as it will have any effect on the value of existing issues of 
United States bonds, it will tend to enhance their value, as it confers 
a valuable privilege and thereby increases the value of all United 
States bonds. From this point of view, the proposed plan should 
deeply interest and receive the approval of the National Banks, 
which on October 31, 1911, owned $691,440,040 of the 2% Bonds, 
out of a total of $730,882,130, more than 9Ay 2 % of the total issue. 
The future value of 2% bonds is problematical, in view of the 
change which is taking place in the rate of interest on all govern- 
ment bonds. 

(C) According to the last report of the Comptroller of the 
Currency, 15,950 financial institutions in the United States other 
than National Banks made reports to the Department. These were 
divided into 12,166 State Banks, 638 Mutual Savings Banks, 1,121 
Stock Savings Banks, 934 Private Banks and 1,091 Loan and Trust 
Companies. All of these financial institutions throughout the United 
States should be in favor of the proposed plan, as it gives them the 
right to secure currency in direct exchange for whatever amount of 
their capital they may find it convenient to invest in United States 
bonds. 

(D) Individuals should be in favor of it because it affords 
them a practical and economical means of converting part of their 
invested capital into currency at a maximum of convenience and a 
minimum of loss. 

So long as the National Banks hold any bonds nozv used as 
security for circulation, they will continue to enjoy all their rights 
and privileges as banks of issue in reference to those bonds. Their 
special privileges as banks of issue will be gradually extinguished by 
the lapse of time and the extension of the new system. The pro- 



NATIONAL BUSINESS CONGRESS 211 

posed plan does not take from them any rights or privileges they 
now possess, but simply extends to any holder of United States 
bonds, upon less favorable conditions, the same privilege now ex- 
clusively held by the National Banks. 

In the opinion of the author, suitable legislation for the adop- 
tion of this plan making United States bonds inconvertible into 
bonds and currency, at the option of any holder during the life of 
the bonds, is in every way desirable and will be highly favorable to 
all public and private interests. 

I am very much obliged, gentlemen, for your kind attention. 
It has been a dry subject, but I hope some of us have profited by it. 
(Applause.) 

The Chairman: The subject, in my judgment, is a very live 
one, and I am sure we will be glad to hear any discussion on the 
subject. 

Mr. Hirshheimer: I agree with the gentleman. The only 
thing I would like to ask him is how is a business man going to get 
these bonds and lay them up? The business man is the power. 

Mr. Jones : I am delighted to have anybody ask me questions 
and delighted to answer any. The business man can only get bonds 
by buying them. 

Mr. Hirshheimer: Yes, and using up his capital. 

Mr. Jones: He can buy them at the present quoted prices, 
because there are always some for sale. Or wait until the Govern- 
ment makes a new issue; they will be issued right along, and with 
my plan worked out he can take as many as he wants. Those are 
the only ways he can acquire bonds, anyhow; they will never be 
given to him. 

Mr. Hirshheimer: How is he going to have them except by 
taking it out of his capital? 

Mr. Jones : He is not going to do it except by taking it out 
of his capital. Isn't it better for him to insure against a pinch, and 
isn't it better for him to have a certain per cent of his capital in- 
vested at three per cent when he don't want it, and at any time he 
does want it, instead of having it with the banks for the same pur- 
pose, able to get it when he does want it ? 



212 NATIONAL BUSINESS CONGRESS 

Mr. Hirshheimer: The active business man has no capital 
outside of what he uses. He is the largest borrower of money in 
this country. 

Mr. Jones : But he has a bank balance. 

Mr. Hirshheimer: When he has a bank balance; yes. He has 
to have credit. Credit is his capital. 

Mr. Jones: Yes. 

Mr. Hirshheimer: If he ties up his capital and puts it away 
at three per cent. Suppose we had $500,000 worth of paper and 
$10,000 of bonds ; that would be a bagatelle ; you could not get 
enough money with that. 

Mr. Jones : My dear sir, if a man has not the money, I don't 
know of any scheme to give it to him. 

Mr. Hirshheimer: No. 

Mr. Jones : I am only proposing a plan whereby a man who 
has money and is willing to finance himself along safe lines can do 
it without fear of being pinched at a certain time by a money trust. 
I am not proposing a plan that gives anybody money that has not 
any. 

Mr. Hirshheimer: No. A man cannot go into business unless 
he has money and has capital, but I do not think it good policy for 
a business man- — and they are the largest borrowers. 

Mr. Jones: Yes. 

Mr. Hirshheimer: To tie up the money in something that 



Mr. Jones: Well, my dear sir, that is a matter of his own 
choice. 

Mr. Hirshheimer: His own choice? No; it is not his own 
choice. A business man at certain times of the year is the largest 
kind of a borrower. 

Mr. Jones: Yes. 

Mr. Hirshheimer: Borrows, perhaps, fifty per cent of his total 
capital. Now, if he puts away even ten per cent of capital in his 
bonds, he would have to borrow ten per cent of that from some- 
body else. 



NATIONAL BUSINESS CONGRESS 213 

Mr. Jones: I am not offering something compulsory. I am 
offering an opportunity. 

Mr. Hirshheimer : I understand this is not compulsory upon 
anybody, but I want to know how is that going to work out with the 
business man? 

Mr. Jones : If he has not any money, it is not going to touch 
him. 

Mr. Hirshheimer: Then he is the man that does the business 
of this country. 

Mr. Jones : Well, but there are hundreds of thousands of peo- 
ple in this country with deposits and investments who need money, 
and yet are not active business men. 

Mr. Hirshheimer: Those are the fellows that will get those 
bonds, but how is the business man going to get those bonds when 
he wants them? He cannot go out and borrow them of people who 
have them laid up. 

Mr. Jones : You can always borrow bonds if you put up their 
value. 

Mr. Hirshheimer: We can always borrow money if we put 
up its value. 

Mr. Jones: Not always. 

Mr. Hirshheimer: Yes. 

Mr. Jones : I have seen the time when we could not. 

Mr. T. M. Sechler: Let the man who has those bonds put 
them up and get the currency and loan it to you. 

Mr. Hirshheimer: Those people who hold those bonds are the 
most suspicious people in the world. They come to you and loan 
you money, but if you want to go to them and borrow money they 
would say : "You are hard up ; I guess I will keep my bonds." 

Mr. Jones : My dear sir, I cannot provide a panacea for every 
situation. I cannot provide for badly organized business men's af- 
fairs ; I cannot do that, but I can give him the right not to be 
pinched in a famine. I have been in Wall Street — I have seen times 
when you could not get money for your payrolls ; I have paid as 



214 NATIONAL BUSINESS CONGRESS 

much as six per cent, and glad to get it at that, for my customers; 
you could not make their payrolls in checks. I was glad to get it. 
Clearing house checks, also. The difference between the percentage 
being the difference in value between a clearing house check and 
the price of the actual currency. I guess there is no one in this 
room who has not experienced it. 

Mr. Hirshheimer: I am talking about a business man who 
uses all his capital in his business. 

Mr. Jones : This does not touch him. They are the men who 
borrow the money and pay the interest. 

Mr. Hirshheimer: Let us let it alone. 

Mr. Jones : You would want this man to go out of business, 
then? 

Mr. Hirshheimer : No ; it does not affect anything that exists 
now. 

Mr. Jones : The sub-treasury should always have on hand 
bonds which need not be larger than notes, and notes to issue 
against those bonds, just the same as the Postofhce Department now 
has blank forms to give you the minute you make out your order. 

A Delegate: The Government has given a discount, at 99^, 
when bonds afterwards sold at 103 to a banker, and I want to ask 
for what reason was that discount? 

Mr. Jones : If the Government is putting out, as it did last 
spring, 50,000,000 of Panama Canal's 3s, on which it got a trifling 
premium, and practically all of which went into the hands of finan- 
cial institutions, because, bear you in mind, that over 79 per cent of 
the entire outstanding bonded indebtedness of this country today is 
in the hands of the National Banks, and there is a lot of it in the 
hands of insurance companies and other big corporations which we 
cannot trace. I do not believe that the citizens today hold five per 
cent of the national government debt. They do not do it for two 
reasons : The currency privilege has made bonds so high, and the 
small per cent that is paid, the small person around the country does 
not want to pay a high premium for a low interest bearing bond, 
and they have no opportunity of getting them at first hand. I claim 
the government would be strengthened with our people if they would 



NATIONAL BUSINESS CONGRESS 215 

do as they do in France and some of the other European countries ; 
if they would say we don't want a paltry 1^ per cent by selling 
these to a syndicate. We are going to sell them and let them make 
the ljHi. That is the reason you buy them, and it is going to dis- 
tribute the Government debt and find a direct market with the peo- 
ple; and by doing that we would have better citizens. 

That is why I advocate the present system should be done away 
with, and it should be first come first served; the smallest bidder 
first, those who order one or two or three hundred. In that way 
you distribute the bonds in the hands of the people and they get 
something on which they have a profit, and then there will be very 
few who want to sell them; speculators cannot make that profit if 
they are allotted to the smallest subscriber first, at par. 

A Delegate: I was very much in sympathy with the gentle- 
man's idea, but I wanted to know whether it was to prevent Wall 
Street — and the gentleman does not need to think my remarks are 
directed at him. 

Mr. Jones : Any Wall Street man is open to suspicion. 

A Delegate: But, of course, gentlemen, it comes back to the 
question that this is a moral question. We are supposed to have a 
government for the people, but we have a government for the peo- 
ple in Wall Street, and the brokers and financial men. I have repre- 
sented corporations all my life. 

Mr. Jones : Pardon me. I have been for many years a mem- 
ber of the New York Stock Exchange. I am one of those men 
upon whom you look with holy horror. There are 1,100 of us and, 
to my mind, they constitute one of the most honorable bodies of 
men in the world, but much maligned. The members of the Stock 
Exchange do not originate anything. They are simply the agents 
of the fellows who do. When we execute an order to buy or sell 
stocks we get the order over a telephone, and we neither know or 
care from whom it comes. We are looking for the % commission. 
Those men are simply men there trying to make a living at $12.50 
for every time they buy or sell 100 shares of stock. I am always 
glad to lift my voice in their favor when I have an opportunity. 

This plan of mine does not increase the volume of currency in 
any way. In the first place, the national banks can now issue cur- 
rency on all of the Government bonds except about 60,000,000 odd. 



216 NATIONAL BUSINESS CONGRESS 

The 50,000,000 of the recent Panama issue from which they with- 
drew it because it would have depreciated the 2's. All government 
bonds have today the same privilege except the 60,000,000 odd. 
You will see the actual figures in the treatise of mine, and it does 
not increase the possibility of one dollar of currency over what the 
National Banks could issue now if they all availed of the privilege. 
It simply goes right to the elasticity of the currency in the hands of 
the individuals without the intervention of a national bank. 

For instance, if you had 10,000 of government bonds today 
you cannot get any currency on them, but you can hand them to the 
national bank and it can loan you the currency. The fact that you 
are getting it through them does not in any way increase the pos- 
sible volume of currency, which is limited to the outstanding of 
United States bonds in any case. The outstanding amount of 
United State bonds is smaller today, by several hundred millions, 
than the combined capital of all the national banks, and yet all the 
national banks are allowed by law to issue circulation up to the full 
amount of their capital, which, at the present day, is several hun- 
dred million dollars more than all of the United States bonds out- 
standing. So that you can see that you could today issue three or 
four hundred million dollars of bonds, and the national banks could 
issue currency against them, too. It is not inflation, but simply a 
change. 

Mr. Sechler: How would you make currency elastic with- 
out you inflate it ? 

Mr. Jones: Elasticity is not inflation. 

Mr. Sechler: If you draw on the treasury in exchange for 
the bonds you are simply reducing the amount of currency in the 
treasury. 

Mr. Jones : Yes. 

Mr. Sechler : You are not increasing one dollar the money 
that the country is wanting. 

Mr. Jones: No. That is left open for a plan of asset cur- 
rency, such as the Aldrich Bill and others are providing for. What 
I propose does not inflate the currency one dollar, but it does give 
you, if you have $1,000 or $1,000,000, the right to have the interest 
on the bond when you do not need the money. 



Mr. 


Sechler: 


rency. 




Mr. 


Jones : ] 



NATIONAL BUSINESS CONGRESS 217 

You have not added one dollar to the cur- 
No, sir. I am not preaching inflation. I am 
preaching elasticity. I am not proposing to add to the store of mon- 
ey. I am only proposing that if I have the same security as a na- 
tional bank, or if I am a trust company or a state bank I can do the 
same as they can. Furthermore, I am not proposing to take the 
privilege away from them. 

The Chairman : Gentlemen, it is now nearly half past one 
and there is another short paper to be read and then the resolu- 
tions. Now this room must be cleared at 4:30 for the banquet. 
Therefore, it is absolutely necessary for us to convene sharp at 2 :30, 
and we will have to work very hard to get through. 

On motion, duly seconded, an adjournment was taken till 2 :30 
o'clock P. M. 



218 NATIONAL BUSINESS CONGRESS 



SIXTH SESSION. 

Wednesday, December 13, 1911. 
2 :30 o'clock P. M. 



The Chairman: We have a paper here from Mr. Robert 
Dollar, not on the program, and Mr. Nye will kindly read that 
paper. 

Mr. James W. Nye: "The American Merchant Marine, in 
Our Foreign Trade." 

Address by Robert Dollar, President of the Robert Dollar Com- 
pany, Oriental Steamship Lines, San Francisco. 

Mr. Chairman and Members of the National Business Congress : 

I read on your letterhead the following: "American ships, 
American built, American manned for American commerce." 

Theoretically, this is right and with all of it I agree, pro- 
vided it can be carried out, but I claim that it is utterly impracti- 
cable for the following reasons : 

First, in the building of ships or first cost, our politicians and 
others who do not know, or those who willfully distort the truth, 
all tell us that it only costs 25% to 30% more to build ships in an 
American yard than in a British yard. What are the facts ? I have 
just built a steamer in Scotland 423 feet long, 54 feet beam, with en- 
gines of 2,500 horse power, and of 8,880 tons dead weight capacity. 
The price, ready for sea, was $250,000.00. Inquiry from American 
yards brought out the information that it could not be built for less 
than $600,000.00. Now to build this vessel in an American yard, 
and to permit her to meet the keen competition in the foreign trade, 
Congress must pay the builders a subsidy of $350,000.00. I need 
not ask you, will they do it? The answer is plain on the face of it: 
They will not. 

Then after we get the American ship, we are met with as great 
obstacles in the way of increased operating expenses. I will again 
leave the realm of theory, which so many discussing this subject 
resort to, and get down to actual results. The American steamers, 
"Hyades" and "Pleiades," 5,000 tons capacity, one year's cost to 
operate for wages and board, each, $39,940.00 The British steam- 
ers, "Bessie Dollar" and "Hazel Dollar," wages and board one 



NATIONAL BUSINESS CONGRESS 219 



year, $16,000.00 each, an excess of $16,940.00 a year on wages and 
board alone. Again I ask who is going to pay the American ship- 
owner this amount to enable him to meet the world's competition? 
If any one disputes those figures, I can give detailed information 
from my books and those of the Boston Tow Boat Co. 

Then we have to count on our Government regulations and 
restrictions, which, during the course of a year, run into a lot of 
money. By our method of measuring ships, we are compelled, in 
foreign ports, to pay from 30% to 35% more for dockage, pilotage, 
dry docking, and all charges, that are based on the ship's measure- 
ment. For example : 

The net British measurement of the "Hazel Dollar" is 2,803 T. 
The net American measurement of the "Hazel Dollar" is 3,582 T. 
The net British measurement of the "Bessie Dollar" is 2,797 T. 
The net American measurement of the "Bessie Dollar" is 3,679 T. 

I have tried to find out the reason of penalizing our ships in 
foreign countries, but have failed to get any satisfactory reply. I 
have been told by Government officials that they know how to meas- 
ure a ship, and require no instructions from foreigners. With this, 
and many other unjust discriminations, our Merchant Marine in 
the Foreign trade has been legislated off the ocean. 

Then in the manning of American vessels, we are compelled to 
carry useless men. I use this term, as no other nations have to carry 
them. One extra engineer, 3 oilers, and 3 water tenders. The 
three last, even the name is unknown in foreign freight steamers. 
Those seven men cost, wages and board, $6,000.00 a year. 

I will not trouble you with the unreasonable exactions of our 
Inspection requirements, which no other nation requires : they would 
fill a page of themselves, and many important and vital requirements 
are left out, so that our Inspection regulations require to be re- 
modeled from top to bottom. 

In view of the foregoing, I say that under existing conditions 
and laws, an American Merchant Marine to engage in the foreign 
trade is impossible. A half loaf is better than no bread, and I claim 
that the only way we can get a Merchant Marine is : 

First — To allow us to buy our ships where we can get them 
the cheapest. 

Second — Permit us to man them as our competitors do. 



220 ~ NATIONAL BUSINESS CONGRESS 

Third — Change our laws and regulations to conform to those 
of our competitors, preferably to those of Great Britain, under 
whose flag more than half of the steam tonnage of the world is 
operated. 

I would remind you that it is not lack of enterprise of our ship- 
owners that has brought us to the humiliating position we find our- 
selves in, as I have a list of ships owned by American citizens and 
flying the foreign flags amounting to 1,452,716 gross tons. This 
amounts to nearly 6% of the entire steam tonnage of the world, and 
the last report of our vessels in the foreign trade had dwindled down 
to less than 600,000 tons. You will all admit that it is dangerously 
near the vanishing point. Did it ever occur to you that, only for the 
Southern Pacific Railroad operating five steamers, and the Hill 
Lines, operating the Minnesota, there would not be an American 
steamer on the Pacific Ocean flying the American flag? The rail- 
roads appear to be able to run them. Private individuals or private 
corporations could not. 

Statistics show us that our manufactures are increasing much 
faster than domestic consumption. Therefore, we must develop 
and extend our foreign commerce. I claim this will never be done 
on a large scale without our own ships, so we must find a way of 
getting vessels. We must do something, and at once. You should 
demand of Congress to enact laws at this session to accomplish the 
desired results. On this trip I am making to oriental countries, I 
know that outside of the Railway steamers, I will never see the 
American flag on a vessel in the foreign trade. (Applause.) 

The Chairman : Gentlemen, is there any discussion on this 
paper ? 

Mr. Ewell: Where was it sent from? 

Mr. Nye: From a steamer on the Pacific Ocean, on which 
Mr. Dollar was traveling. It was sent to Secretary Burnham. 

Mr. Ewell : Do I understand that Mr. Dollar is a ship builder 
in the United States? 

The Chairman: Of San Francisco. Mr. Dollar is in the 
lumber business. He is quite a prominent man along that line. Did 
you care to speak, Mr. Ewell ? 



NATIONAL BUSINESS CONGR ESS 221 

Mr. Ewell : No. I shall not say anything at the present time. 
I shall be glad to refer to some of the points made in the paper, at 
the banquet, to-night. 

The Chairman : You can see the paper if you like. 

The matter of the Resolutions Committee is the next in order. 
Is the Resolutions Committee ready to report? 

Mr. Frost: Mr. Chairman, your Resolutions Committee held 
quite a number of sessions and considered quite a number of resolu- 
tions that were presented and the Chairman of that Committee, for 
the Committee, wishes to thank the members for the scope and 
character of the resolutions submitted to them. They were far- 
reaching in their efforts, and all of them show a result of careful 
preparation, and showed that considerable time had been devoted 
to them, and their purpose was, beyond question, to formulate such 
principles as business, commercial and industrial organizations stand 
for to-day, and demand. They were broad and generous in their 
scope, and yet your Committee, after hours of discussion, found 
that to formulate them in the way in which their importance and 
their character demanded, and the intelligence displayed in this Con- 
gress required, was an undertaking beyond the possibility of a 
successful conclusion by the Committee, in view of its lack of time 
and the importance of the resolutions, because it clearly appeared at 
the start that the Committee was not supposed to bring back any 
glittering generalities. It was felt that the time had come in the 
business development of this country when business men are get- 
ting together, and when they realize that the controlling and under- 
lying causes operating were threatening the bare existence and the 
perpetuity of business. So there was no disposition to bring in 
resolutions that sounded well and meant nothing. It was also felt 
that a legislator or legislative body or committee had a right to ask 
this Congress or any committee representing it, not for general rec- 
ommendations, but for specific recommendations aimed at particular 
and prominent and important matters. To formulate a platform, to 
formulate a policy, to formulate principles upon which business men 
can unite, not in any general haphazard manner, but with the idea to 
strong and forcefully bring out those principles, those platforms and 
those ideas to the attention of the people for their support, and 
require Congress to enact them into laws. In order to accomplish 



222 NATIONAL BUSINESS CONGRESS 

that it was apparent to the Committee, as it must be apparent to you 
gentlemen, that to do it right it could not be done in a minute. 

The Committee was up against this proposition: Should it 
bring back general endorsements of certain matters? Or should it 
make an honest and thorough attempt at this time to formulate the 
principles for which business men stand? And unanimously the 
Committee reached the conclusion that now is the accepted time to 
provide for a declaration on the part of business men which would 
mean something, and now is the time to begin a movement which 
would strike and strike hard, and, in order to do that, it felt that 
the good sense and intelligence of this Congress should be con- 
served, and that more thought and time than the Committee had 
should be devoted to the formulation and preparation of its public 
announcement. Therefore your Committee unanimously recom- 
mends: 

"Resolved, That the President of this National Congress be, 
and he hereby is, authorized and directed to promptly appoint a suit- 
able Committee to formulate a declaration of principles and pur- 
poses which will reflect the necessities and demands of the com- 
mercial, industrial and business interests of the country; and that 
your Committee on Resolutions be discharged." 

I move the adoption of that report. 

Which motion was duly seconded. 

The Chairman : Gentlemen, is there any discussion ? 

Mr. Herbert E. Miles (of Wisconsin) : What would the 
effect of the declaration of the Committee be upon the organizations ? 
Are we to bind our organizations at all after we go home by what 
the Committee might declare ? 

The Chairman : I will leave the Chairman of the Resolutions 
Committee to answer that question. 

Mr. Frost : It was the idea and the sentiment of the Commit- 
tee that if the platform were formulated as to the demands of busf- 
ness now required, it would appeal to the good sense of the business 
men, and, therefore, would not be a glittering generality, and they 
would support it. I don't think the technical question of whether 
an organization is bound enters into it, because, if it had not the real 
weight that appeals to a business man's intelligence it will not have 



NATIONAL BUSINESS CONGRESS 223 

any binding effect or force upon this or any other congress. If you 
have not crystallized it in your considerations so as to formulate the 
desires of business men, then, of course, there is no use to talk about 
binding their judgment. We expect to bind their judgment and the 
organizations, not because it is what a committee may recommend, 
but because of the recommendation having inherent good common 
sense. If it is not so formulated, it is not binding in any way. 

Mr. Gates (of Illinois) : May I inquire whether it is the pur- 
pose of the Committee, after this platform shall have been formu- 
lated, to submit it to the different organizations represented in this 
Congress for their approval? 

The Chairman : I take it, from the resolution, Mr. Gates, 
that that is up to the Committee for which the resolution provides. 
That is the intention, is it not, Mr. Frost? 

Mr. Frost: Yes. To make it absolutely clear, this was the 
idea: That if a committee be appointed by this Congress which 
reflected and crystallized the sentiments of the Congress and the 
institutions back of the Congress, that that committee could formu- 
late a statement of principles, a platform, a party platform, if you 
please, but a statement of principles and policies which business men 
would unite upon. 

You can see at once that to definitely do that you must bring 
together your manufacturer, your merchant, your banker, your 
insurance man, your promoter, your developer of business, agri- 
culturist; you must bring together everybody. While we have no 
way of knowing how that committee would act, yet, unquestionably, 
the resolutions, being drawn by men from all parts of the country 
and from the different industries, would reflect the business senti- 
ment, and those men would be very careful to inquire into all the 
business sentiment. 

Just as before the Resolutions Committee, we have had short, 
thoughtful, deep study of the many subjects upon which the resolu- 
tions were submitted, yet there have been few men who have arisen 
on this floor who said that, as a result of their study, they believed 
that business at this time demanded so and so; that business de- 
manded legislation that would help it, is what they said, but they 
did not say whether the Sherman law should be repealed, modified 
or enforced. When your Committee got together there was one prac- 



224 NATIONAL BUSINESS CONGRESS 

tical matter to get a resolution, and every member of the Committee 
was asked: "What is your judgment with reference to a specific 
recommendation on the Sherman law?" Each individual member 
had his own idea, but, you see, the instant the Chair asked the mem- 
bers to reflect the judgment of the convention as a member he be- 
gan thinking and says : "Well, this reflecting of the judgment of 
the convention is a very serious matter. I guess I better inquire 
around." 

If you are all unanimous, then a resolution repealing the Sher- 
man law would be something to act upon. I don't know what the 
state of mind is here. To make it specific — a congressman has the 
right to ask that. When you go before a Congressional Committee 
and say that business demands a certain thing — what? Laws that 
will help business ? Why, bring on your laws that will help business. 
If we cannot make them, nobody else can. If we do not know how 
to draw the laws that will be beneficial to our own interests, and we 
the business men who expect to be benefited by them, how do you 
expect our Congressmen to do it? We have gone in and said: 
"Hip, Hip, Hurrah ! Give us a resolution that will help business." 
Of course we want it, but what do we want ? 

The Resolutions Committee felt that an assembly like this was 
coming together just like the thirteen original colonies, harassed 
from all points, and it finally stood as the United States. When 
they started in everybody was willing that the government should 
borrow money. Every one of the colonies said : "Yes, let us do 
all we can." But Ben Franklin said: "Who will pay it back?" 
New York says : "Count me out on that." Massachusetts said : 
"No, no ; I cannot bind my constituents." And they went down the 
line and the confederacy went to pieces. 

Here is the point: We are willing and ready to drop every- 
thing that does not personally appeal to us, and stand together. If 
it is the Sherman law, what do you want ? Do you want it repealed, 
enforced or amended? And, if you want it amended, how do you 
want to amend it ? We would lose all the effect of that if we would 
make some nonsensical recommendation as to the Sherman law. Sup- 
pose we said to repeal it. When the shooting is all done I do not 
believe there is a man who wants the Sherman law repealed. He 
will howl about its effect, but I have not heard one business man 
with whom I have sat down in a corner and talked, say: "Let us 
wipe it off the books." Congress is entitled to have a specific recom- 



NATIONAL BUSINESS CONGRESS 225 

mendation, and you cannot make specific recommendations out of 
air. 

Your Resolutions Committee were very reluctant to submit this 
resolution, but we did not think it wise to submit a resolution as 
long as we felt that the country had a right, and we owe it to busi- 
ness, to formulate at this time a declaration of business, just as 
when those people gathered together in the thirteen colonies, and 
those who remained at home had a right to expect Congress to 
formulate for them a Declaration of Independence that they could 
all stand on — and I don't recall when that formulation occurred of 
anybody asking, in any way, shape or form, whether that Declara- 
tion of Independence bound their constituents at home. Why ? Be- 
cause that Declaration of Independence reached right into the heart 
of every man in the colony, and got together those things on which 
the colonists stood. It appealed to every man who read it. They 
said : "These are our sentiments." 

Business requires a declaration of that kind. The Resolutions 
Committee could not get it. We do not think there is energy, intelli- 
gence and character sufficient in the business which can get that 
kind of a declaration within the limited time. Therefore, our Reso- 
lutions Committee send it back to this Congress to get the men who 
we thought, with care, time and consideration, could get a declara- 
tion, which, when you and I see it, we will say: "That is the 
thing." That is what we would stand by and what we would fight 
for. 

While general resolutions are all right, yet general resolutions 
do not quite fill the bill when a man is trying to help you (and some 
Congressmen are) , when he says : "What do you want, and why 
do you want it?" I have not any doubt but what a suitable com- 
mittee can be gathered together, and if they have time enough, can 
bring back the right answer, and rightfully and truthfully say to 
Congress that business men want no Sherman law, this or that or 
the other thing. 

I might be mistaken about business not wanting it repealed, but 
I don't think so. It may be amended or enforced. To formulate 
that into a resolution, the men who formulate it must either in 
themselves reflect the wisdom of others, or must have contact with 
them. It might be well for them to have a heart-to-heart talk with 
people in the different lines of industry, and learn the things upon 
which different ones have reached definite conclusions in their own 



226 NATIONAL BUSINESS CONGRESS 

mind. When a man gets up on the floor and says : "Gentlemen, I 
have studied the Sherman law for fifteen years, and I believe it 
ought to be repealed," that is something you can stand on. When 
a man gets up or when a resolution says: "Well, I think it 
ought to be enforced, or business ought to be better; I don't know 
whether you ought to have this, that or the other thing," you cannot 
stand on that; it only adds to your complexities. You men here, 
whatever ideas you may have on any subject, if you believe we 
ought to have a merchant marine and own our ships, say so and 
give us your convictions on it. If you are just traveling around in 
the air, discussion is good ; but it is too early to formulate anything 
until your ideas shall have been crystallized. A man's intelligence, 
his opportunities, his thoughts, all aid. We need formulation as we 
never needed it before. 

Perhaps I say too much, but I go before a great many Senate 
and House and Legislative Committees. Assume that one-half of 
our legislators want to do what they can. They want to please the 
people. They would rather stay in office and have the people think 
well of them than to have the people scold them. You go before 
them and they say: "What do you want?" That is where labor 
teaches us a very important lesson. They go down before the 
Legislature at Springfield, and, suppose it is a question of boiler 
inspection; there is no reason under the sun why there should be a 
State inspection of boilers, in view of the municipal regulations, but 
they go down there and there is a laboring man there who says : 
"You ought to have boilers inspected." He hasn't any doubt about 
it. Well, he says: "Jones, what do you think about it?" "Well, 
I don't know. Why does my friend want them inspected?" Well, 
by and by they find out why they want them inspected. He is not 
telling that, but finally the law is passed. Four or five years after- 
wards there may be an inspection of boilers by the State. Then he 
wants an efficient inspection. When he gets his law passed you 
will find that an inspector can go out in the country and stop a rail- 
road train to inspect the boiler. The possibility of stopping a rail- 
road train to inspect the boiler when it is out here with a load of 
passengers somewhere in the country is a very vital thing. 

It is a mighty good thing to know exactly what you want and 
state what you want, and Congress has the right to ask it. We have 
no right to go down there and say : Give us a law that will pay a 
dollar's worth of debts and which will only cost us fifty cents. We 



NATIONAL BUSINESS CONGRESS 227 

have a right to go down there and say that we want a merchant 
marine, and we are entitled to it. That is a definite and specific 
thing; we are specializing on that. If we do not specialize and 
make a declaration, we are just like other organizations that have 
been gotten together, but you know the disappointment and the 
sorrowful thing about organization; and you all know just as well 
as I do that you so discuss matters that when you are ready you 
cannot knit them all together and get a definite action. That is the 
hardest thing in the world in organization, to connect what you 
want and public sentiment. I do not believe that you can connect 
permanently action and public sentiment unless you are asking for 
action on those things that are fundamentally brought out and which 
are fundamentally right. Is there some committee of five that can 
go out and draw them out of the air ? No, they have to be brought 
out of you and me and every other man. You did not build your 
business in a minute. Today you are trying to prescribe a course 
for three or four years from now. You are trying to develop a 
principle on which a problem for tomorrow can be developed. 

You heard the message from Robert Dollar, and you know how 
that typified the condition. There was a shipper, according to his 
notion he had to carry $6,000.00 worth of worthless labor, and no 
other ship had to carry it. He had to do it because the law de- 
manded it. His margin was closing down. It is time when we have 
to formulate something. Labor is already formulating for the con- 
trol of vessels by providing for the number of men that shall be 
employed on steamers and the amount of their pay. 

Some time ago we had occasion to return forty or fifty Sicilians 
who were brought here for show purposes. We went to all the 
steamers and they said they could not carry them. They had some 
religious rites that made a slight difference. They said : "We can- 
not carry them." Well, they could not go on first-class ships, so 
when we went to those great tramp steamers, and to the United 
States Government they said: "If you take these men on your ship, 
sixty of them, you have to make structural changes on your ship; 
that will cost $17,000.00." We had to get them out of the country, 
and when we went out of the country they said to the ship-owner : 
"No, you cannot do it unless you make structural changes in order 
to give them more air." Labor has filled up the laws with reference 
to the operation of vessels, because they have definite and specific 
recommendations. We are not fighting labor. This is no time for 



228 NATIONAL BUSINESS CONGRESS 

fighting; this is the time to get to the markets of the world. What 
we want is to formulate the things that we want. We want to show 
people how bad conditions can be overcome. 

In reference to this declaration of principles, if we can make 
the kind of declaration that we ought to make I think it would 
appeal to the good sense of the business men of the country; and 
we will have a great big number of men who simply say to Con- 
gress : We want this or that, and we will get it. But we have no 
right simply to unload duties on a Congressman — assuming that he 
is a half-way honest Congressman — to add to the present perplexi- 
ties he has. If they agree that the resolution offered by the Resolu- 
tions Committee should be adopted 

The Chairman : The resolution of the Committee is rather 
vague. The resolution asks the Chairman to appoint a committee. 
It does not say how many or what kind of representation that com- 
mittee shall have, whether one from each national or industrial or- 
ganization, or to whom it shall report, or when. It seems to me that 
resolution could be drafted a little more plainly so that it would be 
clearly understood. 

A Delegate: Is it the purpose of this Congress to adjourn 
and meet again in the Fall ? Or leave it to a Committee with power 
to act, or to correspond with the different associations ? How is the 
committee to be made up, and how many ? I would like to have that 
a little more to the present. 

Mr. Ewell (of New York): I am here presenting the Na- 
tional Merchant Marine Association, and I have a decided convic- 
tion on the subject that we should have an American Merchant 
Marine. I believe I am down for this evening to inflict on this 
Congress my views on that subject, and that is the reason I have 
not taken the opportunity to say anything before. I believe, how- 
ever, that the counsel's suggestion was a direct invitation to me, as 
Secretary of the National Merchant Marine Association, to stand 
up, and I say I am ready to defend the idea that we want a merchant 
marine, and want it now. 

Mr. Jones : I came here to deliver an address, to promote an 
idea that I have. I am glad to have had the opportunity of doing 
it. It was not my intention or expectation to take part in any debate 



NATIONAL BUSINESS CONGRESS 229 

or offer any suggestions, but, as this gentleman has just said, it 
seems to me to have been invited. 

About a month ago one of the leading Senators asked me if I 
would make him some suggestions that might be of benefit to him 
in the coming session of Congress — just opened. I wrote a memo- 
randum of my suggestions as to what might be helpful legislation. 
It was comprised under six heads, and only covers that much paper. 
Shortly after that my friend, Senator Pavey, was in my office. I 
showed it to him. He said: "That is just some of the thoughts 
that I want to embody in something I am going to do." By chance, 
I happened to have in my pocket, among my several memoranda, a 
copy of that. If suggestions are wanted as to concrete ideas, these 
may be all thrown in the air, but I would be very glad to offer them. 
If they are not wanted, I will not. 

Mr. Frost : They are certainly wanted. 

Mr. Jones : It may be a little radical. My first idea of reform 
legislation was this : 

First: Prohibit corporations owning stock of other corpora- 
tions. 

Second: Prohibit voting trusts. Establish cumulative stock 
voting for corporations, the same as exists in Pennsylvania and 
Missouri. 

Third: (a) Prohibit banks from loaning directly or indi- 
rectly to their directors. 

(b) Prohibit banks owning stocks in other banks, such as 
Secretary MacVeagh advocated in a speech two weeks ago in Chi- 
cago, but which I invented, or at least introduced in the New York 
legislature in the session of 1908. 

(c) Prohibit banks owning securities to an amount in excess 
of 10% of their capital stock, except when taken through the fore- 
closure of loans. 

This I advocated before the New York legislature three years 
ago, because we had many banks that were losing their functions as 
banks of deposit and discount and becoming pools. One had 76% 
of its assets in stocks and bonds and only 8% loaned on paper. 

(d) Prohibit directors being directors in more than one bank 
in the same city. 

(e) Require banks to keep their own reserve. 



230 NATIONAL BUSINESS CONGRESS 

There are now seven hundred and odd millions in reserve 
money in New York City banking through other banks which 
figure twice as reserve, and it was this so-called reserve that in the 
panic of 1907 — not to go back to 1893 — the banks out here were 
unable to get what they wanted. 

Remove the statute of limitations for bank officials' offenses, 
which is now two years. 

I advocated this before the New York legislature in 1908. The 
papers all jumped on me, but the Comptroller of the Currency, in 
his annual report, published the other day, advocated it himself for 
the reason that he says in two years, under the present statute of 
limitations, you cannot find out what they have done. They can do 
all they want to and hide it for two years. I was called radical 
when I advocated that before the New York legislature three years 
ago, but I am glad now to be supported by your worthy Chicago 
citizen, Mr. MacVeagh. 

(f) The next referred to the plan on which I spoke this 
morning, to government bonds; that in the future they should be 
allotted to the smallest subscriber at first at par, etc. 

If you want concrete propositions, there are enough of them, 
and I am pleased to submit them, to engage this Congress for a 
week. 

Mr. Miles : This resolution asks the President to appoint ten 
men to draw up a declaration of principles. Do you want it to be 
understood that this declaration will be the declaration of those ten 
men and not of this convention ? It may be their expression of their 
judgment of what this Congress should be for. It may be a better 
recommendation than this Congress can agree upon; all right; it is 
not the declaration of this Congress. 

The Chairman : That is not quite in accordance with what 
was intended. It was intended that this Committee should be ap- 
pointed and that then the Committee should take these matters up 
with prominent men throughout the country and get. their views as 
to further action or resolution. 

Mr. Miles: Then that Committee will be kind of a clearing 
house for that sentiment, sentiment of the organization? 

The Chairman : Yes. 



NATIONAL BUSINESS CONGRESS 231 

Mr. Miles: Then it is not a declaration of the sentiment of 
this Congress at all. 

The Chairman : In a way it is. 

Mr. Miles: They should have a working Committee to go 
and disclose the judgment of the business organizations. May be 
that is it. 

The Chairman: I think perhaps I can clear up the atmos- 
phere on this a little. I attended the conferences of the Resolutions 
Committee, most of them, and I am frank to say that the members 
of that Committee were practically in accord as to what should be 
done on all of the matters referred to in the program of the National 
Business Congress. But, Mr. Miles, and gentlemen, it was like this : 
You, John, and you, Tom, sit down to discuss the Sherman Act, 
and you discuss it for an hour, or you may discuss it for two hours, 
or for four days, and you reach a conclusion, but when you have 
reached that conclusion you have not formulated in the proper lan- 
guage or in the language which you desire to present it to your law- 
making bodies just how they should enact it. This Committee on 
Resolutions were agreed on practically everything that was brought 
before them, but when it came to formulating resolutions and put- 
ting them into such shape as would be acceptable to this Congress, 
acceptable to the country at large or acceptable to the Congress at 
Washington, it was found the next thing to impossible to do it in so 
short a space of time. That is the result of this resolution, and it 
seems to me a very tangible reason as to why we should not rush 
into print with some resolutions that could be picked to pieces by 
newspaper men and by other people throughout the country. 

Mr. Irving Washington (of Chicago) : I think every one 
must appreciate the difficulties that confront the Resolutions Com- 
mittee. I, for one, have been awaiting, with the keenest expectancy 
and interest, the resolutions that might be offered for discussion 
here. It seems to me that in view of the difficulties with which the 
Committee confesses it is confronted, the important duty of formu- 
lating expressions which shall reflect the soundest and best views of 
business over the country should not be imposed upon any com- 
mittee, without at least giving the opportunity to the Committee to 
present its conclusions for approval and endorsement by this body at 
an adjourned meeting, or by the constituent organizations repre- 



232 NATIONAL BUSINESS CONGRESS 

sented here. It would certainly add greatly to the force of any de- 
clarations that might be adopted by that committee to have them 
endorsed after passage by the Committee. 

A Delegate: Mr. Chairman, I was a member of the Resolu- 
tions Committee, but I am still in favor of this resolution for the 
following reasons : I represent two large bodies, members of this 
association, namely, the Illinois Manufacturers' Association and the 
United States Brewers' Association. I have heard so many resolu- 
tions which, in my opinion, were pretty good, and I hope that some- 
thing will be accomplished; but I surely am not ready to vote on 
anything that was presented. I don't see how anybody could, in so 
short a time. For that reason it is more time that is necessary. 
These subjects should be worked out, and if the Chairman will 
appoint, as I expect he will, men who will have the interest of this 
Congress at heart, it seems to me that we could not do better than 
to have this go over and give the proper time and opportunity for its 
consideration. 

I have heard many times that if a business man goes into poli- 
tics he degrades himself. That is foolishness. What gives him that 
opinion? Nothing but the reputation of the politician. If a busi- 
ness man goes into politics his opinions are looked upon with favor 
by his neighbors and by the voters. A laboring man always looks 
upon the business man as a man of good judgment, and they say, 
What is good enough for the business man is good enough for us. 
If you make it an issue that we should be recognized in politics, so 
that we will see that the right men are elected, men who have the 
interest of the country, of the poor and rich at heart, we will do 
better ; we will have more influence. I hope this Congress will take 
that into consideration and base future actions on that consideration. 
I am certain if business men enter politics we will get better politics 
at large, because the men who will stand for something for nothing 
will have no standing. 

Mr. Miles : I am in favor of this resolution, but ten men can- 
not meet in a week, or in one year, and express authoritatively our 
views, because we have not passed upon an essential thing in this 
Congress. I am decidedly in favor of the resolution, but the clear- 
ing house expression — they cannot express the conviction of the 
Congress because the Congress has not expressed itself. If they 
could go back to their constituent organizations and have the resolu- 



NATIONAL BUSINESS CONGRESS 233 

tion approved by them, then it would become the judgment of the 
constituent members of this Congress. I think that is good law, 
isn't it, Mr. Chairman? 

Mr. Frost : If you are asking me for an expression of opin- 
ion, this resolution speaks for itself. Any declaration that does not 
appeal to the good common sense of business men will have no force 
or weight, and the only way to get it to appeal to the good common 
sense of the business men is to put good, hard common sense into 
it, and good common sense is the hardest thing to get quickly and at 
the time you want it. So far as the question of whether this organ- 
ization is called together to ratify and approve, that means to meet 
again, as it carries its own methods with it. 

My good brother says that he is ready to defend the merchant 
marine. Sure, we all are. He did not tell us how to get it. We 
want a merchant marine. Why, we ought to have it. Congressmen 
will agree with you, but how can we get it? Here are some specific 
recommendations, many of them. Some with reference to banking. 
How can we weave all that together so we can have the banker with 
us ? We have the manufacturer with us, we have the brewer with 
us, and all that, and they say : "Yes ; we are all together on that." 
It is not the judgment of ten men. A great speech is the production 
of the man who delivers it. What is it that makes great speeches? 
Words to picture. It is the ability to just weave the facts together 
that all people believe. (Applause.) It is hard to do that. It is 
certainly foolish to try to do it until you have gotten the intelligence. 

Now, I would like to hear anybody here who has a fixed con- 
viction on anything. We all will demand a merchant marine, but I 
suppose tonight we will be told how to get it. Not in a spirit of 
criticism do I say this, but suppose I had the power to get it and I 
should say : Why shouldn't I get it, but how will I get it ? We are 
convinced we ought to have it. 

In this resolution there is not any "nigger in the woodpile." It 
is up to the good sense of this body to decide upon what they want. 
What the Committee was agreed upon was that the time was ripe 
to state what we want and exactly what we want, and why we 
want it. We also felt that nobody could state it as well as we could; 
I do not mean this Committee, but I mean these men here assem- 
bled, and since we could not state it we had no right to ask anybody 
to give us something that we don't know how to ask for. We want 



234 NATIONAL BUSINESS CONGRESS 

to get all the angles of the situation. The brewer has his troubles ; 
his agitation is the cost of material, his license ; he has one thousand 
and one exactions. He knows his business ; we cannot tell him how 
to run it, but we know we can tell him one thing, and that is the cost 
of production is increasing, his market is decreasing and his facili- 
ties for producing are greater than they were before. He has been 
blind, deaf and dumb, unless he knows that himself without our 
telling him. Perhaps you cannot cut off the cost of productions; 
perhaps that is fixed; maybe those are produced now as cheaply in 
bulk as they ever will be. The cost experts will tell us about that. 
How can we get that in just such shape that when we lay it down 
before a business man he will say, "Yes, I will subscribe to that," 
and then he subscribes to it to help push it along. You cannot run 
it without money, and you cannot get money out of people unless 
you can show it is well worth while. 

The Resolutions Committee had no private opinion; it only 
offered this as something to crystallize the matter because it is time. 

In 1838 it would have been folly for an equal number of Aboli- 
tionists to have gathered together and said that the time was ripe 
for a declaration against human slavery. That would have been 
absolutely nonsense. Eighty per cent of the people believed in it, 
but when the Republican party was born it was a very good time for 
the people to get together and make a declaration. Why ? To voice 
the sentiment of the people. Men like to go out and hammer their 
own way. They would rather outsell a competitor. You are only 
advancing in business when you admit that there is competition. It 
is only the other fellow beginning to take your orders; his ma- 
chinery is a little better, and he is more aggressive; then you begin 
to recognize competition, and then you begin to get together. Now, 
you have been hammered together ; the fact that we are here shows 
that, and the lawyer is hammered together with you. The day when 
the lawyer can make any money is not only a matter of public inter- 
est on their part, but it is an intelligent self-interest. The days 
when men can go ahead by breaking down are gone. If you cannot 
build up, you belong to the dark ages. That we are all agreed upon ; 
you cannot get away from it. Hold-up men may get money from a 
man by beating him up once or twice, but the days of getting ahead 
by holding-up policies have gone. In putting this together we do 
not want the banker, or the manufacturer, or the steel men, or the 
railroad men to think they are getting the worst of it. The only 



NATIONAL BUSINESS CONGRESS 235 

way they will feel they are getting the better of it will be when they 
know about it. 

I haven't any idea who the Chair will appoint on the Committee, 
but from what I know of the Chair I know the Committee, when 
appointed, will not reflect the interest of any single man or class of 
men, and no one would want that. Every line of interest must be 
taken into consideration, just as Mr. Reynolds told us the other 
day. The bankers cannot do it, and the merchants alone cannot do 
it, but you can all get together. By all getting together, and working 
together, you can formulate a declaration of principles, so that when 
people see it they will instinctively say that it is good. It is just 
like the eye of a needle. People have been sewing for 1,300 years, 
but only since the needle was invented. After the needle was in- 
vented why didn't they think of it before; it was so simple. That 
made sewing possible, but I do not believe there is anyone here 
quite so wise as to formulate a policy quite so simple, but I do 
think you can formulate one that we can all see is a correct one 
when we hear it. It is possible to do it, but you cannot do it in a 
minute. 

I feel pretty strongly upon these glittering generalities in the 
way of resolutions. You read them and when you get through you 
don't know what they mean. Maybe business is not quite ready, 
that it has not been hammered enough. It has been hammered at 
both ends and the middle to the point where it says it is ready. If 
not, next year it will have been hammered a little more, and the 
next year still a little more, because the persons hammering are 
having a pretty good time doing it. If it is the Sherman law, let us 
find out about it. If it is because one bank holds stock in another, 
let us find out about that. If it is because a combination is right, let 
us find out about that. 

I have done altogether more talking than I had expected to. 
A helpful talk would be where a member feels that he has reached 
a certain conclusion on a certain matter. I do not expect a man to 
jump up and say he thinks he can do this, that or the other thing. 
We will agree on things that we think we ought to have. Now, we 
want to know how to get them, and how to get them is something 
that any man who is trying to help has a perfect right to know, and, 
unfortunately, it is not like going to the doctor or going to the 
lawyer. There is nobody whom you can go to who can tell you 
what will help you but yourself, and the reason is there are no busi- 



236 NATIONAL BUSINESS CONGRESS 

ness experts save those who are in business. A business man's 
opinion is tested right on the spot, and the bank balance spells 
whether he knows his business or not. With a lawyer or a doctor 
that may not be true. A man may go to a doctor and he will pre- 
scribe medicine for him, but it may be that the man would have 
gotten well just as quickly without having any medicine at all. The 
same is true with a lawyer ; a client goes to a lawyer and asks his 
advice, and accepts it and acts upon it and is satisfied, although the 
advice may have been wrong as a legal proposition, because it was 
not really tested out. Your opinions were tested at once. You have 
to solve this problem for yourselves. 

Mr. Pavey : I suggest that we can reconcile what seems to 
be a difference of opinion. I think the question arose over the 
question whether this Committee, if appointed, would have power 
to bind any organization. I take it that if this Congress were to 
pass a resolution of some specific character, the probabilities are that 
no delegate has power to bind his organization on any one proposi- 
tion, and if the organization that he represents did not agree with 
his individual opinion to which he gave his consent here, then he 
may not conform to them. The Chairman of the Committee has 
used an illustration that I think will be of value if further extended. 
He referred to the adoption of the Declaration of Independence. 
The colonies sent delegates to a Constitutional Convention to pre- 
pare a Constitution. When they had done it it did not bind any 
state whatsoever. It had to be ratified by all the states, and all 
they could provide was that if nine actually ratified it, it would take 
effect ; and it did take effect as soon as it was ratified by nine. 

It seems to me, laying aside this question of Committee, that 
if you now agreed on some resolution and every man voted for it, 
it would not bind the organizations which did not like it. When 
this Committee shall have been appointed and adopted a platform 
or constitution, or Bill of Rights, whatever you choose to call it, it 
will not bind any man here unless it meets his approval. But it 
might become a very useful document in securing the adhesion of 
these organizations to a plan of action. Let the Chairman appoint 
the Committee and discharge this Committee, and then if the Con- 
gress wishes to take up some one of my friend Jones' propositions 
and vote upon it, it will not be in conflict with the work of that 
Committee to do it. 



NATIONAL BUSINESS CONGRESS 237 

The Chairman : May I further inflict upon you my observa- 
tions? Those are that 90% of all the resolutions that have been 
passed during the past number of years by commercial bodies have 
been directed into the air. The proposition that we have now before 
us is to have the Committee appointed who will thresh out these 
questions, bring them before the proper organizations, such organ- 
izations as will be members of the general organization, if you 
please, and when they finally formulate resolutions, those resolu- 
tions will be directed to your hired men in Washington, and until 
you get at those men, until you get at them right, say, with hammer 
and tongs, to use the familiar expression, you will not accomplish 
anything, and you never have accomplished anything until you did 
it in that way. This Committee will take good care to see that the 
resolutions are directed direct to our law makers. That is the ob- 
ject, really, concretely, I think, of this operation. 

A Delegate: I have been giving this matter considerable 
thought for some years, and the gentleman remarked that the ques- 
tion of increase in cost, with a lessening market, was one of the 
factors that brought these people together. When you appoint a 
committee, if you care to receive some of the material that I have 
dug up in the last four or five years, that will convey to your mind 
the cause of the increasing cost, I will be very glad to submit it. I 
have never presented it. The economic conditions of to-day were 
apparent some years ago. I can say positively three years ago. You 
could have figured out in figures what your economic conditions 
are to-day. It is not any guess work. It has been demonstrated 
thoroughly, and I have got them and I can give them to the Com- 
mittee and they can, perhaps, get some definite idea upon resolu- 
tions. 

Mr. Wallis: Mr. President, when I came into this meeting 
as a representative of the National Implement and Vehicle Associa- 
tion, in our discussions in reference to this meeting, we were fearful 
that the government would be shot too quick. We were rather of 
the opinion that we would, perhaps, have to use some talk upon the 
floor, and perhaps some influence with the Resolutions Committee 
to prevent too much action, too quick action. The Resolutions 
Committee outdid us all on that end of it, and I think wisely. I 
am more of that opinion after listening to the remarks that have 
been made on the floor since the resolution was introduced. 



238 NATIONAL BUSINESS CONGRESS 

It seems to me that what we ought to aim at as business men 
in this conference is along the line of a constructive platform which 
will unite the business interests. If you attempt to promulgate that 
here within the short length of time the Resolutions Committee had 
to consider it you would pass something out as a business men's 
platform which you would find would be almost immediately at- 
tacked and you would have no platform and it would be torn into 
shreds. I had some weeks ago attended a conference in New York 
City and in an association where the question was up for discussion 
of the introduction of a simple resolution on that question — one 
situation. That matter was threshed out, I am told, for about 
three days. I heard one evening two hours' discussion of it, and I 
heard the next morning two hours' more discussion of it, before six 
men could agree upon presenting that simple resolution — one asso- 
ciation upon the business situation. 

Now, gentlemen, you are dealing here to-day — this is a Na- 
tional Congress; you have the East and the West and the South 
and the North to take into consideration, and all of its ramifications, 
and they are intricate and many, and I think the Resolutions Com- 
mittee are acting wisely in deferring action in the formulation of a 
platform for the business interests of this country to unite upon. 
A platform, if you please, along the lines that I recommended in 
the address that I delivered before this meeting, that would be 
broad enough in scope to unite the business interests on a platform 
that could be presented to both political parties as a plank for their 
platform. You cannot do that hastily; you need time to get the 
concrete sentiment of the East, the West, the North and the South, 
and then you may not be able to accomplish it. 

There is just one point I would like to touch upon, and I don't 
know that I understand the resolution thoroughly. This appoint- 
ment of the Committee to have power to act. It is a little indefinite 
in my mind as to just how they are to act and for whom they are 
to act. My own idea of it is that you are seeking practically, indeed, 
it seems that you are asking for more time for this Resolutions 
Committee and simply extending more time to report to this Com- 
mittee; is that it? 

Mr. Frost: That interpretation might be put upon it. I 
don't know that the Committee has any very definite idea beyond 
the fact that it was time to formulate, and when formulated we 
should get the business sentiment back of it that we wanted. J 



NATIONAL BUSINESS CONGRESS 239 

think the ordinary form of procedure would be that the platform 
if formulated would be discussed by every business organization in 
every form and nature, and see whether it did reflect. It was very 
vague and indefinite, but it was because the Committee could not 
do it any more definitely. 

Mr. Wallis : I think the resolution should be amended so 
that that Committee, when appointed, will report to a subsequent 
call of this Association or this Business Congress. 

The Chairman : I think we have got to the point now where 
it would, perhaps, be as well for you to explain to this Congress 
what has been talked about with reference to absorptions, you might 
say, of this Congress, by the National Business League of America. 

Mr. Wallis : I will be very glad to do that. I will go back 
a little, with your permission, Mr. President. 

The Chairman : Yes ; I would be very glad to have it. 

Mr. Wallis: So that this Congress may have the judgment 
of the National Implement and Vehicle Association, in their meet- 
ing held last October, they felt that the time had arrived when the 
business interests of this country should get together and act con- 
currently. They appointed a Committee on Political Action, with 
the object in view, as specifically stated, of interesting other organ- 
izations in this country, and to appoint similar committees and call 
a joint meeting of all those committees for the consideration of this 
question. About the time that Committee was appointed the officers 
of the National Business League of America issued their call for a 
National Business Congress. Our Committee met and we de- 
cided that this was directly in line with the work which we were 
seeking to bring about, and so we got in conference with the officers 
of this Association. Since coming to this city the question of en- 
larging the scope of the National Business League of America* so 
as to take in various organizations in what might be termed a clear- 
ing house — in other words, make this National Business League of 
America, which has the name, and which stands for the things 
which you want as business men, make this, instead of any specific 
local issue which you are seeking to bring out, make it national in 
its scope; make it a clearing house through which your political 
affairs may be cleared. 



240 NATIONAL BUSINESS CONGRESS 

Now, the gentlemen here all represent various interests. I 
stand here representing the National Implement and Vehicle Asso- 
ciation. A gentleman here represents the banking interests of Wall 
Street; another gentleman represents the merchant marine, and 
various interests are represented in this meeting. You cannot bring 
into an association of this kind the absolute specific details of those 
various and varied interests. You have got to come up through 
a clearing house with some concrete idea as to what you are going 
to legislate on universally. In a broad sense it affects those various 
interests, but there are various ramifications and each one should 
thresh that out in their respective associations. We are affected in 
the National Implement and Vehicle Association specifically; it has 
affected other interests similarly to ours. If that is true, take it up 
through this clearing organization and let this organization be a 
clearing house by delegates from your various organizations 
throughout the country, and let them appoint delegates to come here 
and let this organization be crystallized into something that will 
act nationally, and through your Congressmen in Washington. 

That, gentlemen, it seems to me, is along constructive lines. 
If we can get that going, and then get your platform wisely and 
carefully considered, and put it up to this organization to work out 
the details as you go along, as to what specific questions you want 
taken up, and how you want them taken up, we would have an 
organization right from the ground up. You can organize in any 
State and you have a clearing house association that will affiliate 
with this, and then things local in the State will be handled there. 

I hope you will change that resolution so that it will be to 
report back to a continuation of this meeting. Let us not lose 
the effect of what we have gained here, as you have started here 
by these papers and this discussion; it is of value and should be 
continued. 

In regard to this clearing house, it was discussed by eight men 
or more yesterday, and they were all in accord that that was the 
idea that should be brought about at the adjournment of this meet- 
ing. 

A Delegate: These resolutions should present the sentiment 
of this Congress and not of the trade associations back of the dele- 
gates. 

The Chairman : That is true. 



NATIONAL BUSINESS CONGRESS 241 

A Delegate : I think, perhaps, there has been some misunder- 
standing by Mr. Miles and others that we represent those associa- 
tions in that sense, and that the resolutions would. I do not under- 
stand it so. I understand the resolutions simply represent the ideas 
of this particular meeting. As the gentleman just said, I really feel 
that this meeting should not go off in thin air. We ought to ac- 
complish something. I do not want to offer this as a suggestion, 
but this resolution should in some way come back to the National 
Business Congress, and that could be approved. 

Mr. Gates: The one thing that has impressed me more 
strongly in the proceedings of this Congress than anything else has 
been the unanimity of opinion among all these different men on 
different subjects and the different associations generally. There 
does not seem to be any difference of opinion, in my judgment, that 
could not be easily reconciled by such a committee as provided for 
in this resolution, and I believe that if such a committee were ap- 
pointed they would formulate a declaration of principles which 
could be sent to all these associations and which would be adopted 
by them. From the practical standpoint I want to give a little illus- 
tration of that, because I believe it would work out in the same 
way. 

In 1898 the foundrymen and the manufacturers of this country 
found themselves sorely oppressed by the moulders' union, and an 
association called the National Founders' Association was formed. 
At first it was an association that did everything it could to make 
agreements and to work in conferences with the moulders' union. 
As time went on we found a great deal of difficulty in doing that, 
because we found a great deal of difficulty amongst the members. 
We ourselves didn't know exactly the ground that we stood on. 
Here was a great foundry employing a thousand men that had 
some sort of an idea, and a small foundry that had different condi- 
tions, which had some other question and some other kind of an 
idea, so it was finally impressed upon us that we must find some 
common platform on which we could stand. A committee, the same 
as is suggested here, was appointed. That committee formulated a 
declaration of principles. When they were ready to report a con- 
vention was called and the declaration of principles was submitted 
to that convention. The convention ratified it; they were pleased 
with those declarations and it was passed unanimously. Then, un- 
der the constitution, this declaration of principles was sent to each 



242 NATIONAL BUSINESS CONGRESS 

member of the Association, with the result that the declaration of 
principles was adopted unanimously by that Association. That was 
in 1903, and that declaration of principles has stood until this day, 
and is still standing and has never been amended. It fitted the case 
and has been the standard and the rule of the Association from 
that time on. Now, I believe that that is exactly what is wanted 
here. I think this Committee should formulate this declaration of 
principles. It should then be submitted to a convention, if you 
please, and ratified by that convention and then submitted to the 
individual members of all these subscribing associations. I don't 
know of any way in which you can so quickly and thoroughly get 
before all those who are interested in it and get exactly the informa- 
tion that the Committee wants. 

Mr. Sechler: It has been pretty well advertised that here 
are representative organizations of the United States, and we are 
going to establish a declaration of principles that we stand for. It 
has been pretty well advertised in the papers, and now what is the 
cry? That we had not sand enough, or we did not know enough 
about what we wanted, so we referred it to a new committee to 
report to somebody else in the sweet bye and bye. Mr. President, 
I think whatever the opinions or differences of opinions have been 
in the Resolutions Committee, it was their place to report to us the 
resolutions before them, either with or without recommendations, 
and let us pass our opinion on them. We have an opportunity now 
that we will not have repeated. We cannot get so many bodies to- 
gether again as this in the next year, and if this new committee is 
to be appointed, they can make recommendations and send them 
to the various parties, the different bodies in this organization, but 
we will have no meetings for months to come. I believe the manu- 
facturers' meeting in May next is the first one. The National Im- 
plement and Vehicle Association meets next October. What im- 
pression is our action here going to make on Congress? It comes 
out as a confession that we don't know what we want. I make an 
amendment, Mr. President, to the motion to appoint that Committee 
that the matters under consideration at this Congress be referred to 
the National Business League of America for its action. 

Mr. Bannister : I would like to say just a word in report- 
ing the resolution, and in doing so, to explain it. In addition to 
being a manufacturer, I have sometimes had the pleasure, and some- 






NATIONAL BUSINESS CONGRESS 243 

times the displeasure, of being an officer in the organization of 
manufacturers for the last seven and a half years. For seven and 
a half years we have tried to find out what we could do, and do 
rightfully and legally. I do not think that any manufacturer of 
any prominence who has had his ear to the ground is at all surprised 
at the conditions as they exist to-day, if he were thinking about it 
three years ago. I think almost any one could have pictured about 
this condition, particularly within the last three years. We have 
taken counsel upon counsel, and we find one counsel tells us to do 
something, and, before we can get into action upon it, there is some 
court decision that will show us that if we did it we would probably 
all go to jail. So, it would seem to me, that this was a very wise 
movement, and I disagree with my friend, Mr. Sechler — whom I 
know very well and who has just spoken here — that it would be 
impossible to get an organization of this kind together very soon. I 
venture to say that within three months from now, or within one 
month from now, if a call were sent out you would have a better 
representation of the manufacturers and business interests of this 
country than you have here to-day. I sincerely believe this, because 
I have been one of the kind that has been hammered here and ham- 
mered there until we would like to know exactly what shape to as- 
sume. We have had little hats and big hats, and in the latest style. 
The ladies don't know just where they are, and we don't know just 
where we are. Now, if we can have a wise committee — as I have 
no doubt the Chairman will appoint — which will study over this 
proposition for us and then put it up to us and say, Now we can 
work upon this line or that, we would be ready to work with all 
energy there is in us — and my experience has been that there is a 
good deal of energy in us when we once get started the right way. 

Mr. Dold (of Buffalo) : Mr. Chairmaa J think it would be 
wise if this Congress adjourned without formulating a solid, firm 
plan. It would be iniquity if they followed the example of some 
form of our legislators and enacted a dream into a law the next day. 
I believe the Resolutions Committee acted very wisely in not at- 
tempting a world-wide problem in a few hours. To me the plan 
seems best to appoint this committee, in the discretion of the Chair- 
man, and let them formulate the resolutions, send them to each 
organization composing this Association and ask their directions to 
act upon them, and then ask them to submit the resolutions to their 
members. When that information comes back — it is not a small job, 



244 NATIONAL BUSINESS CONGRESS 

I realize — when that information comes back this -committee can 
then propose a foundation that will mean something, that will stand 
for something, and if it is criticised point back to the fact that this 
represents so many organizations, representing so many people. 

I was sent to this Congress uninstructed by the Chamber of 
Commerce of Buffalo. They evidently had confidence in my judg- 
ment. I would not feel like passing upon some resolution that 
would practically represent the opinion of our three thousand mem- 
bers, or the hundred thousand members of this organization; and 
yet I believe the time has passed for business men to stay at home 
and whisper down the well or holler up a chimney. I believe, to 
use the words of our townsman, President Cleveland, a condition 
and not a theory stands before us today, and that the sooner busi- 
ness men get together and show those who are acting unfriendly to 
the interests generally, that they have ideas they can unite upon, 
and they propose to do so, the sooner the business man will become 
a factor and not — I was almost going to say, the laughing-stock 
of some of the politicians. That is the way I look at this matter at 
this time. 

Mr. Bannister: I believe what the gentleman from Buffalo 
has stated is along the same line. The National Economic Society 
I believe, has done the same thing; bankers and others, and asked 
them to indicate the order of their preference on those questions, 
which ultimately simmered down to eleven. I think some similar 
result can be obtained by this organization in the same way. 

Mr. Dold: As far as the Chamber of Commerce of Buffalo 
is concerned, I agree that if the meeting were called in a month or 
two, I believe with the gentleman over there, that with a proper call 
and energy, with push to it, it would bring one or more representa- 
tives from every association, which would make us five hundred 
representatives here instead of one hundred. 

Mr. Boothe (of California): Mr. Chairman; we are en- 
deavoring to justify the report of the Resolutions Committee, which 
hardly seems necessary, perhaps, after what the chairman has said. 
The Resolutions Committee was appointed by the President of this 
organization, and when we convened we looked around at each 
other and we felt we had a wise President. He has justified his 
position by the character of the men he has appointed on his com- 
mittee. 



NATIONAL BUSINESS CONGRESS 245 

We took the matter up with the greatest zeal and hopefulness, 
and, after a great deal of discussion, it was resolved that each one 
should submit some form of resolution that would embody what he 
wanted, and, after more or less personal consultation, it was dis- 
covered that the time was too short to thoroughly consider such a 
matter. It grew as we considered it. I did not recognize or con- 
sider the fact that it would be easy to offer a resolution here which 
would add to the perplexities of the business men of this country. 
It is not so easy to offer resolutions which would get them out of 
their perplexities. As a result, this resolution was formulated and 
unanimously passed. There was no disagreement between the 
members of the Resolutions Committee, but we felt that if four 
men, or five men, could think of so many things they could do but 
had not the time to do — I want you to understand there was no lack 
of ability to formulate resolutions in the least, we all felt we could 
do it, but we felt if it were left to the President, he could appoint a 
larger committee of ten and give them more time and not encumber 
them with any instructions, that they could bring together something 
that the business men of the country, a large number of them, a large 
majority of them, would find would meet their requirements. The 
reason that in that resolution many of the things that have been pro- 
posed by these gentlemen here were not included was, we thought, 
and we think still, that a committee of ten would have other ideas, 
and for that reason the matter was left to the committee to take up, 
feeling that with the time to consider they would arrange for con- 
sultation with different organizations and would formulate a better 
way whereby this splendid organization could be conducted in some 
form. I would like to add to the resolution, if it is permissible, that 
the President of this organization shall be a member of that Com- 
mittee of ten which he will name. 

The Chairman : Two amendments have been offered to this 
resolution. Is there any second? 

(The amendment was duly seconded.) 

Mr. Dold : May we have the resolution read once more ? 

Mr. Frost: "Resolved, That the President of this National 
Congress be, and he hereby is, authorized and directed to promptly 
appoint a suitable committee to formulate a declaration of princi- 
ples and purposes which will reflect the necessities and demands of 



246 NATIONAL BUSINESS CONGRESS 

the commercial, industrial and business interests of our country; 
and that your Committee on Resolutions be discharged." 

Mr. Bannister: I would like to move to amend that by 
having the President of this Congress made a member of that com- 
mittee. 

Mr. Ewell: I agree with the sentiments of the gentlemen 
representing the Congress on these resolutions, but I do think that 
there are some specific matters that have been so thoroughly 
threshed out that it might be very desirable if this Congress, before 
adjourning, pass a resolution on an important particular matter, 
and that particular matter which I have in mind is the question of an 
American Merchant Marine. The reason why I would like to bring 
that in here, and would like to make this exception, is the fact that 
myself, and Mr. John D. Long, under the auspices of the American 
Manufacturers' Association, have discussed this matter before the 
Chambers of Commerce and Boards of Trade all over this country, 
from Worcester, in the old Colonial State of Massachusetts, and 
from the Lakes to the Gulf, and, in nine cases out of ten, those 
commercial bodies have passed resolutions favoring an ocean mail 
contract. I was not asked to suggest the means, but I would like, 
at this moment, to suggest a means which would give us a Merchant 
Marine, in about two minutes' consideration. I do not wish to go 
into any long discussion of the matter at all. 

The Chairman : I would like to hear from you, Mr. Ewell, 
on that subject. 

Mr. Ewell : And that is that we have an ocean mail contract, 
that is precisely what we have here today, which we obtained under 
the Harrison Act in 1891. It is not a subsidy. The ocean mail 
which we have now, should extend to steamers with ten or twelve 
or sixteen knots speed to go on a long voyage, for example to South 
America, and Australia and the Orient, because it is utterly impos- 
sible to run those high-speed steamers twenty knots, as is provided 
under the present Act which gave us the St. Paul and St. Louis, the 
only good boats we had, practically, in the Spanish war. We got 
those boats under that Act. 

Now, what we are trying to bring about in Congress, is to give 
us an Ocean Mail contract that will provide four or five dollars a 
mile for steamers of sixteen knots speed. That would be practical ; 



NATIONAL BUSINESS CONGRESS 247 

$4.00 a mile has been suggested. Such a bill came within three of 
passing Congress, as you all know, only a little over a year ago. 
There were only three votes against it. The Ocean Mail Bill, pro- 
posed by Senator Gallinger, did not reach the House, but it provided 
for such a measure, and it has been the consensus of opinion of this 
great commercial business that an Ocean Mail contract on those 
lines would give us an American Merchant Marine, and I would 
like to except from this general resolution that you are offering to be 
passed here, the matter of offering, presenting a resolution here by 
this committee, drawn up, to be passed by this Congress, that would 
give us an Ocean Mail contract, similar to that suggested in the 
Gallinger Bill. 

The Chairman : Mr. Ewell, will you step to the front here 
and dictate a resolution just as you would like to have it? 
Mr. Ewell : Yes, sir. 

Mr. Washington: Mr. Chairman, I doubt the wisdom of 
having any resolutions adopted and reported back to this Congress 
at an adjourned Congress for its action; and in order to get at the 
sentiment in respect to that, I desire to move to amend the resolu- 
tion, by adding thereto, in the appropriate place, the words : "And 
that resolutions so formulated, shall be reported back to this Con- 
gress at an adjourned session, to be held within six months from the 
present date — to be held at the call of the Committee upon comple- 
tion of its work." 

My reason for suggesting six months, was to give them all the 
time possible and still have the work completed and the results of 
the efforts of this committee given to the people of this country 
before the National Convention of either of the great political 
parties. 

The Chairman : There is another amendment offered here. 

Mr. Frost : I have that amendment. 

The Chairman: Mr. Washington's amendment? 

Mr. Frost: Yes. See how this would do: "And that such 
declaration of principles and purposes shall be reported back to this 
Congress;" do you want to put the limitations within a certain time? 

Mr. Washington : Perhaps that is not necessary. 



248 NATIONAL BUSINESS CONGRESS 

Mr. Frost : I might make one explanation with reference to 
the committee. There is nothing said about reporting back to this 
Congress. The Committee felt that the Congress ought to de- 
termine for itself whether it wanted to reassemble, or the committee 
determine that, and especially representing the National Business 
League of America, which called the conference, the Committee did 
not want to be in a position of any apparent precluding of the judg- 
ment of anybody, and we rather felt, a Committee of eight, which 
would be wise to carry on another conference would call one. Of 
course, if that meets with the approval of the body, I suppose it 
would be a pretty good thing. 

Mr. Vopicka: I second the motion, Mr. Chairman. 

The Chairman : You have heard the motion. All in favor 
say Aye. Contrary, Nay. Carried. That is on Mr. Washington's 
amendment. 

Mr. Frost : There was one other amendment which was made 
and seconded, and that was that the President should be a member 
of that committee. 

Mr. Vopicka : I second that motion. 
The motion was duly carried. 

Mr. Johnson : Unless there are some objections, I think it 
will be a good idea to endeavor to get at least 500 here, representing 
all the organizations, and have this adjourned meeting in Washing- 
ton City, and have the business of the Association in the form of 
resolutions presented there as a body. 

Mr. Vopicka: You would get a larger crowd here than 
you would in Washington. I agree that they have the right to select 
the place of meeting. You might just as well leave it to the Com- 
mittee for decision here as anywhere else. 

The Chairman : The question is on the amended resolution. 

Mr. Frost : I will read the resolution as it now stands : 

"Resolved, That the President of this National Business Con- 
gress be, and he hereby is, authorized and directed to promptly ap- 
point a suitable committee (of which the President shall be a mem- 
ber), to formulate a declaration of principles and purposes, which 
shall reflect the necessities and demands of the commercial, indus- 



NATIONAL BUSINESS CONGRESS 249 

trial and business interests of the country, and that such declaration 
of principles and purposes shall be reported back to this Congress ; 
and that your Committee on Resolutions be discharged." 

Mr. Sechler : What number of members is to be on the Com- 
mittee ? 

Mr. Frost: The Committee has always been a suitable Com- 
mittee. There has been no limitations on its numbers. The object 
was so that it would be large enough and broad enough, because of 
the diversity of interests it represents, to get the real consensus of 
opinion. Now, whether that should be ten or twenty, I think no- 
body in this body definitely knows. 

Mr. Dold: Mr. Chairman, I would like to know if that con- 
templates requesting ideas of all the members of this body of the 
organization, so when you are through they have had nothing to 
do with it? 

Mr, Frost: I think that contemplates sending out, not only 
to every business organization represented here, but to all business 
organizations of the country, and have not only the approval of 
every organization, but of every member of the different organiza- 
tions, so when it comes back it will be something that every man 
w r ill stand by, just as he stands by his Bible or religion, or party 
belief. 

Mr. Dold: Should not that resolution be amended in that 
respect ? 

Mr. Frost : The only trouble about that is the character of the 
committee you would get. I do not think you should hamper that 
committee, because it is going to be a pretty broad-gauged one, and 
I feel that the committee that voices the sentiments of this body is 
going to do the very best thing they can do. 

The Chairman : You have heard the resolution, Gentlemen. 
The motion was duly carried. 

Mr. Washington : Mr. President, I move that when we ad- 
journ, we adjourn subject to the call of the Chair. 

(Which motion was duly seconded and unanimously carried.) 

Mr. Sechler: I move that a vote of thanks be extended by 
this Congress to the National Business League of America for the 
very elegant entertainment they have given us, in the way of attend- 



250 NATIONAL BUSINESS CONGRESS 

ance at the first theatrical performance, the opera and the banquet 
to be given tonight. 

Mr. Bannister: I second the motion. 
(The motion was duly carried.) 

Mr. Ewell: My distinguished brother here has suggested it 
is getting so late we better defer that resolution. 

The Chairman : Mr. Dold, of the Jacob Dold Packing Com- 
pany, has a short paper which he would like to read to you. 



THE PACKING INTERESTS. 

Mr. Jacob Dold: Mr. Chairman and Gentlemen — I had' 
intended, among the five-minute talks allotted to members, to 
bring us a subject which I believe is as near to this organi- 
zation of business as it is to me in my profession. It rather stretches 
itself out to six or eight pages which I can probably read in from 
eight to ten minutes, if I may transgress upon your time to this 
extent. 

.♦ I came here expecting to be an interested listener, and then go 
home and report to the President of our Chamber of Commerce, as 
its delegate to this convention, accordingly. 

However, the broad, generous, commercial spirit which has 
pervaded this assembly of the brainy thinkers among those who do 
things, and create something in this world, has been most inspiring; 
and even those of us who worry along at home in our daily channels 
of activity, are forced to the realization that the putting up of our 
shutters at night, after the day's business, does not by any means 
complete our whole duty, our larger civic duty, either to ourselves or 
to our fellow men, and business associates in the community. 

Prompted by these sentiments, it occurred to me to utilize this 
opportunity to state a few facts and add a few words in behalf of 
our fellow business men now on the Anti-Trust grill, the Chicago 
Packers, and I do so purely out of the natural sporting desire we all 
have in us, to see fair play for both friend and foe. 

Our firm has nothing in common with the large packers. We 
compete keenly in all territory for the business, and they force us 
with their enterprise to do more business than we really care to, but 



NATIONAL BUSINESS CONGRESS 251 



candor compels me to admit their competition is generally fair and 
reasonable. 

The Dold Packing Company is classed among the "little fel- 
lows" in the packing business — the so-called independents. We 
have plants in the East and in the West. We handle about 1,000,- 
000 head of live stock a year, or say around $25,000,000 of business, 
and while this is small, compared to the magnitude of the larger 
packers centering at Chicago, the distribution of even this amount 
of product spreads over 1,000 market points in the United States 
and Europe, brings us into such close competitive contact with our 
competitors that, with our eyes always open to protect our interests, 
it may safely be presumed that we at least know what is going on in 
the meat line. 

Admitting there would be more stability and more comfort in 
this very closely figured business (requiring a large tonnage with 
comparatively small returns on the daily turn-over), if everyone in 
the trade could be allowed to get together now and then and talk 
matters over in a frank and fair manner, yet were I placed before 
any tribunal, I could not truthfully say there was apparent any real 
evidence of the fixing of prices among the large packers to the 
studied and intentional detriment of the small, or "independent" 
packer. 

I have not studied closely into the merits of the proceedings 
now going on against the large packers in Chicago, being only a 
naturally interested spectator, yet it does seem anything but reassur- 
ing to the stability and safety of our large manufacturing interests 
of all classes to see a bunch of busy men, not non-producers, but 
men of constructive ability, creators of industry, and who, what- 
ever their shortcomings may have been, have surely done much to 
promote the country's industry and benefit its labor as well as the 
consumer, since never in the history of this industry has the produc- 
ing margin between the farm price and the price to the dealer, been 
so small and narrow, or fresh meat so generally obtainable, thus 
benefiting both producer and consumer — to see such men thus forced 
to neglect their business, to be treated like ordinary criminals on 
such seemingly technical grounds for prosecution, and especially so 
to those who, from rubbing up against the buying and selling end 
of their business day by day in the keenest and sharpest competition, 
can discern no evidence in their trade doings to indicate that in actual 
practice they are by unfair means stifling competition in the meat 



252 NATIONAL BUSINESS CONGRESS 



line or fixing prices to either increase the cost of meat to the con- 
sumer, or to drive competition out of business. And it seems 
obvious they could not very well kill both these birds with the one 
stone. 

As among the strongest and most adhesive competitors they 
have in the fresh meat line, I don't mind indicating to you how they 
have stifled the business of my own firm of oppressed and down- 
trodden butchers. 

In 1902, ten years ago, we handled a total of 313,000 head of 
live stock. In 1912, we will run nearly 1,000,000 head, and the in- 
crease has been steady, year by year. 

In tonnage, the figures in 1902 were 50,591,000 pounds; in 1912 
they will run over 200,000,000 pounds. In volume of business, 1902 
shows a little under $5,000,000.00, while last year it ran over $22,- 
000,000.00. 

The bidding on government contract, although open to every- 
body, is generally considered a big firm's job, and if combination in 
any branch of the business were easy, it would be so in this. We 
first got into the game in 1905 with 100,000 pounds, and year by 
year this was increased until the chunk pried loose from our trade- 
stifling competitors ran up to 1,259,000 pounds. 

And now that we are talking frankly as among business 
men, I don't mind mentioning a few figures, which become public 
record after bids are awarded — showing that in the last Navy con- 
tract let for bacon, the bids ran thus : 

M $ 95,147.00 

S. H 96,036.00 

S 96,346.00 

D. . . 97,563.00 

A 105,812.00 

a variation of $10,700.00, or over 10% in a business whose earnings 
on the turn-over run around two or three per cent net. 

In last bids for Army supplies they ranged from $12.35 per cwt. 
up to $13.62, with practically all of the packers bidding, and, by the 
way, this time we go in, being the lowest bidders. 

And these are fair samples of the periodical bidding as far back 
as our records go. 

So much for my firm having been stifled and side-tracked by 
the "Beef Trust Barons." And what is true of ourselves, is true 
of every small and medium-sized packer who has pushed his busi- 
ness in aggressive spirit and adopted modern up-to-date methods 



NATIONAL BUSINESS CONGRESS 253 

and systems, and there are probably many of those who could, no 
doubt, show as large or even better progress. 

And had there been a real grievance we, or any of the above, 
as the really injured parties, would surely have been the first to make 
a holler, since, being neither bashful nor under any obligations to 
the larger packers, there would have been every reason for us so to 
do and none to withhold a kick if properly coming. 

Now, as to combining on prices: when I tell you that ^c per 
pound of net profit, actually made on every pound of product we 
can produce would yield 16% to 20% on our capital stock, and that 
if we could be guaranteed %c net profit for ten years, we would 
agree to retire. You may judge for yourself on this point, and 
probably conclude with me that if there really was a sure-enough 
combination to fix prices, no bunch of combining rascals, having the 
power to do so, would be chumps enough to stop at a little dinky 
one-eighth cent per pound. A quarter of a cent per pound added to 
the meat bill, would cost the average family about five cents per 
week, the price of a "chromo." 

A large volume and a close margin on the average turn-over 
throughout the year is, in the nature of this business, with its ups 
and downs of market fluctuations, of supply and demand, of the 
fickleness of the public appetite, and, under present rigid govern- 
ment inspection of meats, the uncertainty, after you have paid the 
honest farmer your good money at full values, as to whether the 
carcass will pass the inspection or will be chucked into the grease 
tank, and at your own loss, of course. 

In this connection I may mention that from fifty to seventy-five 
thousand pounds of food products are now condemned and practi- 
cally confiscated per week at one of our plants only, while the total 
for all packing in the United States is estimated to reach probably 
the enormous aggregate of 100,000,000 pounds for the year, with 
practically no redress, the packer standing the entire loss. 

This, in many cases, we believe useless and wanton destruction 
of food products, the same which the State allows the uninspected 
packer or butcher next door to sell freely and without tangible evi- 
dence of harm or dissatisfaction on the part of the consumer, ac- 
counts in a large measure for shortages in the meat supply ; while 
the cost of distribution from the dealer to the consumer has been 
greatly enhanced because the majority of them, since the fashion of 
going to the market personally with a market basket on his arm, 



254 NATIONAL BUSINESS CONGRESS 

nowadays, expects nickel-plated fixtures in his shop, demands princi- 
pally the best cuts, say 26% of the carcass — only — with automobiles 
to deliver in — asks you to come to his home for the order, deliver 
the meat at a certain hour (a sort of individual delivery) ; wants 
you to send a man to solicit, and oftentimes asks you to drive up 
right away and exchange it. 

People don't seem to realize that all this costs money, costs 
enormously, and contributes in a very large degree to the high cost 
of cheap living, and some one has to pay for it, and, naturally, it is 
the consumer. 

And as to the poor, down-trodden farmer — and, by the way, we 
haven't heard much of him since the very high prices of live stock 
the past year or two — it is surely hard for us to feel bad for a pro- 
ducer supplying the raw product on the basis of making us pay — 
and he did make us pay — about $30.00 for an animal that probably 
did not cost him over $15.00 to produce, as was the case last year 
when the people, led by some of the press, and by some of the 
politicians, were yammering against the high cost of living and 
blaming the packer who actually suffered a heavy loss on every 
pound of meat produced. 

There is just one more item. I understand the packers are also 
charged with fixing prices on products sent to branches through the 
medium of what is known to every packer shipping to branches, as 
the "request price," or, in other words, the "guessed price" — since 
we had to guess at what the salesman will finally get for the profits 
and also what the buyer will pay for it. 

One of the earliest records we have of selling beef in the old- 
fashioned, slip-shod, catch-as-catch-can way, was when a lad by the 
name of "Jack" swapped the family cow for a few beans, simply 
because nobody had posted him as to the probable market value of 
the animal. And the family would brobably have "gone broke" 
had not the story-teller helped him out, and in something like the 
way the so-called beef trust is charged with doing. 

The modern and practical way to market the cow nowadays is 
for Bill to get about $30.00 for "that air critter," and if he 
cannot do that, do the best he can, and if Bill comes home with 
$27.50 or even $25.00, the farmer feels he has "done well." 

Now, that is what the packer, either large or small, has to do 
when shipping products to the often uncertain business ability of 
the salesmen at the other end when matched up against the shrewd, 



NATIONAL BUSINESS CONGRESS 255 

practical butcher, who is usually an expert business man, and a close 
sharp buyer. 

Cattle are often killed one day and shipped the next, which does 
not always give time to figure out the exact cost of dressed beef 
before delivery. 

Then in a bunch of, say 100 cattle, even though shipped from 
the same feed lot, there are likely to be from four to half a dozen 
different qualities, or "grades" we call them, each with a separate, 
intrinsic market value. Therefore, the "request price," or "guess 
price" on the probable price the product should fetch when sold on 
the market by the salesman. 

He could not, by any means, be expected to be held firmly to 
that price, since the fluctuations of the market, the influence of the 
weather, supply and demand, and the factor of general competi- 
tion are far too uncertain and must be considered — he is simply ex- 
pected to do the best he can. 

And if, by chance, he does now and then get full or better than 
the "request price," we look upon it as a sort of windfall, and feel 
that he "did well." 

Gentlemen, I thank you. (Applause.) 

The following communication was read, as indicating the enor- 
mous harm the present agitation is likely to do, both to the packing 
interests and the live stock interests of this country, and indirectly 
to general business : 

"WAR OFFICE, LONDON, S. W. 

(Ref.) 16th November, 1911. 

Contracts Firms A-979-2 : 

Gentlemen: In reply to your letter of the eleventh inst, I 
am directed to inform you that pending the ultimate of the pro- 
ceedings in the United States of America, against certain meat- 
packing firms, it has been decided that none of the firms in- 
volved shall be invited to tender for Army supplies. 

I am, Gentlemen, Your Obedient Servant, 

(Signed) N. F. B. Osborn, 

For Director of Army Contracts." 

The Chairman : We stand adjourned until this evening. 



256 NATIONAL BUSINESS CONGRESS 



THE CONSULAR SITUATION. 



By Austin A. Burnham, General Secretary of the National 
Business League of America. 



(Presentation omitted for lack of time before the Banquet.) 



Mr. Chairman and Gentlemen of the Congress : 

Since the organization of this Government, until the year 1906, 
appointments to the American Consular service were made more 
upon grounds of party service and party affiliation, than for fitness. 

While the nation was young, however, and our foreign trade 
activities were comparatively few, the necessity for an efficient con- 
sular service was not keenly felt, and the spoils policy of the ap- 
pointing powers was endured without emphatic protest ; but, as our 
foreign commerce became an important factor of our progress and 
prosperity, and the demand for larger foreign markets increased, 
the need of a thoroughly competent consular service became impera- 
tive, for upon the business ability of the consul his value to his 
country depends ; not that he is expected to sell American products, 
but to discover and report opportunities to that end. 

The need for a higher standard of efficiency finally became so 
acute that, about twelve years ago, there was a nation-wide organ- 
ized effort on the part of business interests to secure enactment 
of a law that would result in placing the consular service on a per- 
manent merit and business basis; making qualification the test for 
appointment and achievement the open sesame to promotion. 

Since the movement began many consular bills have been intro- 
duced in the Senate and House ; most of them contained merit pro- 
visions ; a few were reported with amendments, but died on the cal- 
endar ; the remainder were pigeon-holed by the committees in charge 
with the exception of the comprehensive Lodge Bill, No. 1345, 
which, after being stripped of all its merit provisions by the Senate 
Committee on Foreign Relations, was enacted April 5, 1906. The 
discarded merit provisions of the Lodge Bill, however, were incor- 
porated in President Roosevelt's executive order of June 27, 1906, 
and made operative on that date. Whatever improvement has been 
made in the consular service since that time must be credited to the 
executive order. Soon afterward, during the Sixtieth Congress, 



NATIONAL BUSINESS CONGRESS 257 

business interests commenced a vigorous campaign to secure enact- 
ment of an adequate law, by the introduction of the Hopkins- 
Lowden bill, which was not reported. The Cullom-Sterling bill 
followed in the Sixty-first Congress, but that measure was laid on 
the table by the Senate Committee on Foreign Relations on the 
alleged grounds of unconstitutionality, January 26, 1910, and the 
action of the committee given to the press. So far as we are 
advised, this was the first public statement of that committee to the 
effect that that, or any of the consular bills previously introduced, 
was unconstitutional. 

Taking the rejected Cullom-Sterling bill intact, the National 
Business League of America has incorporated with it provisions 
grading the secretaries of the diplomatic service, placing them under 
the merit system somewhat similar to the general plan of the Exe- 
cutive Order, issued by President Taft on November 26, 1909, and 
framed the new Bill S. 3621, introduced by Senator Nelson of Min- 
nesota, December 11, 1911, the same being identical with H. R. 
15,925, introduced by Representative Foss of Illinois, December 15, 
1911. Briefly stated, the bill, the merit principles of which have, 
for many years, been endorsed and urged by every business interest 
in the United States, and recently by the American Chamber of 
Commerce in Paris and American Association of Commerce and 
Trade in Berlin, provides : 

First — Appointment of candidates, within reasonable age limits, 
to the lower grades of the service, after thorough examination. All 
candidates to be designated by the President for appointment, sub- 
ject to examination. 

Second — Vacancies in the higher grades of the consular service 
to be filled by promotion from the lower grades on the basis of 
efficiency. 

Third — Creation of an Examination Board with rules for ex- 
amination of candidates. 

Fourth — Complete Americanization of the service. 

Fifth — Appointment of consuls and consul-generals to grades 
instead of to places ; designation of places to be made by the Presi- 
dent. 

Sixth — The Government to pay the actual expense of trans- 
ferring a consul, his family and effects, when ordered to a new post. 

Seventh— Grading the Secretaries of the Diplomatic Service, 
with fair compensation. Appointment and promotion to be under 



258 NATIONAL BUSINESS CONGRESS 

examination rules and records for efficiency, similar to those pro- 
vided for the consular service. 

Eighth — As between candidates of equal merit, proportional 
representation of all the States and Territories in the consular 
service. Political affiliations of candidates not to be considered. 

THE LOWDEN BILL. 

Near the close of the third and final session of the Sixty-first 
Congress, Representative Lowden of Illinois introduced a short 
form bill, which provides for the classification and compensation 
of Secretaryships in the Diplomatic Service, with provisions for ex- 
amination, appointment and promotion, covering the consular 
service also. The bill requires the Secretary of State to publish, for 
the information of the President, a list of candidates who have 
passed a creditable examination ; but there the matter might rest, as 
the bill, if enacted, would impose no obligation whatever upon the 
President, nor upon the Senate, to appoint or promote from the 
published list. The bill provides for an Examination Board, but does 
not provide for an examination rating-scale, or for an age limit to 
determine eligibility, and age largely determines the measure of fit- 
ness and length of efficient service. No provision is made for the 
complete Americanization of the consular service, nor for the ap- 
pointment of consuls and consuls-general to grades, instead of to 
places, nor for the transfer of a consular official, his family and 
effects, from post to post, at the expense of the Government, all of 
which are included in the Nelson-Foss bill. 

So far as placing the consular service on a permanent merit 
and business basis, through the inevitable changes of party admin- 
istration, the Lowden bill, if enacted, would be "more honor'd in the 
breach than the observance." 

Notwithstanding the Senate Committee on Foreign Relations 
has pronounced the merit provisions of the Cullom-Sterling bill, 
now incorporated in the Nelson-Foss bill, unconstitutional under 
that section of the Constitution which provides that "The President 
shall nominate, and, by and with the advice and consent of the 
Senate, shall appoint consuls," it is not believed that the Nelson- 
Foss bill would interfere with the Constitutional right of the Presi- 
dent to nominate and appoint, nor with the right of the Senate to 
advise and consent, as the merit system as incorporated in the Nel- 
son-Foss bill simply regulates the exercise of the constitutional 



NATIONAL BUSINESS CONGRESS 259 

power and protects the President and the Senate against the ap- 
pointment of incompetent men to the foreign service, by providing 
that only those candidates who have been designated by the Presi- 
dent for appointment, subject to examination, and have passed with 
credit before an Examining Board, shall be eligible for appointment 
to the lower grades of the foreign service. 

The only objection to a consular law which would obligate the 
President and the Senate (as would the Nelson-Foss bill) being a 
question of constitutionality, the crux of the situation is simply a 
matter of interpretation of the spirit and purpose of the Constitu- 
tion. In this connection, as showing certain broad views of the 
limits of the Constitution, by eminent authorities, the following 
quotations are submitted : 

President Taft at Augusta, Ga., just before his inauguration, 
said : "That Constitution, simple, clear, and comprehensive, has in 
the past been capable of so fair construction as to meet in a marvel- 
ous way the developments and emergencies of our country, which 
could not have been anticipated by those who framed it, in any detail 
at all, and I am certain that the same Constitution will meet the 
emergencies which may come in the future." 

Again at New York: "When we examine that wonderful in- 
strument, we find that the men who made it, made it short, com- 
prehensive and simple, that it might be open for us to carry out what 
the future had in its womb — problems of which they could see only 
the hazy outlines." 

Those patriots in homespun, the authors of the Constitu- 
tion, with their simple needs, planning for the future of a mighty 
nation, then in embryo, saw but the distant headlands of the future. 
They could hardly "look into the seeds of time and say which grain 
would grow and which would not." They wrought as best they 
knew, leaving posterity to supplement by enactment such details to 
the general plan as conditions might, from time to time, demand, 
without, however, violating any of the provisions of that remarkable 
document. 

Another eminent authority was Mr. Justice Story of the United 
States Supreme Court, who referred to the general character of the 
Constitution as follows : 

"The Constitution unavoidably deals in general language. It 
did not suit the purposes of the people, in framing this great charter 
of our liberties, to provide for minute specifications of its powers, 



260 NATIONAL BUSINESS CONGRESS 



or to declare the means by which those powers should be carried 
into execution. It was foreseen that this would be a perilous and 
difficult, if not an impracticable, task. The instrument was not in- 
tended to provide merely for the exigencies of a few years, but was 
to endure through a long lapse of ages, the events of which were 
locked up in the inscrutable purposes of Providence. It could not 
be foreseen what new changes and modifications of power might be 
indispensable to effectuate the general objects of the charter; and 
restrictions and specifications, which, at the present, might seem 
salutary, might, in the end, prove the overthrow of the system itself. 
Hence, its powers are expressed in general terms, leaving to the 
legislature, from time to time, to adopt its own means to effectuate 
legitimate objects, and to mold and model the exercise of its powers, 
as its own wisdom and the public interests should require." 

In an argument for the enactment of a Lodge bill, before the 
Committee on Foreign Affairs of the House of Representatives, 
January 25, 1900, the late John W. Ela, then the General Counsel 
of the National Business League of America, referred to the Con- 
stitutionality of the merit system as follows : 

"The question of the constitutionality of a law which requires 
■ the appointments of consuls to be only made from persons who have 
passed an examination — in view of the fact that the Constitution 
puts the appointment of consuls into the hands of the President, 
with the approval of the Senate — has, I know, been raised at various 
times. 

"Upon the examination of this question we believe that even if 
a bill should be so framed it would not be held unconstitutional. 
The question has not been raised in the Supreme Court of the 
United States, but there are decisions of state supreme courts that 
requirements of the same character in civil service laws which direct 
that the appointment shall be made of one out of three applicants, 
found to be fit by examination, do not take the power of appoint- 
ment away from the appointing officer, but are merely regulations 
for ascertaining qualifications, and are constitutional. 

"The same principle seems to have been acted upon by Congress 
in its legislation on consular matters, for in 1855, and later, it has 
prescribed where consuls shall be sent, and their rank and salaries." 

While it is true that in the cases before the state supreme 
courts, above referred to, the offices were created by legislative 
enactment, not by constitutional provision, yet the constitutionality 



NATIONAL BUSINESS CONGRESS 261 

of the merit principle of examination, appointment and promotion, 
as involving all branches of the public service, federal, state and 
municipal, is clearly indicated and emphasized in the course of an 
opinion delivered by the late Mr. Justice Peckham (then Justice 
of the Supreme Court of the State of New York; later Associate 
Justice of the United States Supreme Court) in the case of Rogers 
vs. Common Council of Buffalo, supra, as follows : "Looking at it 
as a matter of common sense, we are quite sure that the f ramers of 
our organic law never intended to oppose a constitutional barrier to 
the right of the people, through their legislature, to enact laws 
which should have for their sole object the possession of fit and 
proper qualifications, for the performance of the duties of a public 
office on the part of him who desired to be appointed to such office. 
So long as the means adopted to accomplish such end are appro- 
priate therefor, they must be within the legislative power. The 
idea cannot be entertained for one moment, that any intelligent peo- 
ple would have consented to so bind themselves with constitutional 
restrictions on the power of their own representatives, as to prevent 
the adoption of any means by which to secure, if possible, honest 
and intelligent service in public office." 

As the appointing power for the Consular Service is vested 
equally in the President and the Senate, and the President desig- 
nates for appointment, subject to examination, upon recommenda- 
tions of the Senators, there seems to be no valid reason why the 
Chief Executive and the Legislative branch of the Government 
should not agree upon the enactment of a consular measure making 
permanently operative the merit principles of the Executive Orders, 
as provided by the Nelson-Foss bill. Any consular law, optional 
with the President and the Senate to obey or disregard, would prove 
to be absolutely worthless so far as permanence is concerned. 

Executive Orders are simply temporary rules of action for the 
formulation and operation of a system for the general welfare, 
pending enactment of adequate legislation. The merit system as 
now applied to the consular service, is an unqualified success. Our 
national legislators admit it, yet, while extolling the present high 
standard of appointments, deplore the only means yet suggested to 
make that standard secure for all time. 

The efforts of business interests to secure enactment of an ade- 
quate consular law, constitute a leading factor of the struggle to 



262 NATIONAL BUSINESS CONGRESS 

permanently substitute the "Merit System" for the vicious "Spoils 
System" in the selection of American citizens for the public service. 

Adherence to the merit system, under a national statute, will 
give to our foreign service "Tall men, sun crowned," who will carry 
American prestige, good will and commercial supremacy to the re- 
motest parts of the world. 

The "Spoils System" offers a premium for dishonesty, extrava- 
gance and incapacity. It is even responsible for high crimes and 
misdemeanors. It has nerved the arm of the assassin to strike 
down the Chief Executive of more than one great nation. Ameri- 
can business men should rise in one united effort and retire it for- 
ever from the appointive and legislative powers of American gov- 
ernment. 

THE NELSON-FOSS BILL. 



S. 3621 — H. R. 15,925 — Sixty-Second Congress. 

For the Permanent Improvement of the Consular and Diplomatic Service. 
Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, That the 
consular and diplomatic system of the United States be reorganized 
in the manner hereinafter provided in this Act, and under such 
rules and regulations, not inconsistent herewith, as shall be pre- 
scribed by the President, subject always to the advice and consent 
of the Senate. 

Sec. 2. That vacancies in the office of consul general and in 
the office of consul above class eight shall be filled by promotion 
from the lower grades of the Consular Service, based upon ability 
and efficiency, as shown in the service. Vacancies in the office of 
consul of class eight and of consul of class nine shall be filled — 

(a) By promotion on the basis of ability and efficiency, as 
shown in the service, of consular assistants and of vice consuls, 
deputy consuls, consular agents, student interpreters, and interpret- 
ers in the Consular and Diplomatic Services who shall have been 
appointed to such office upon examination. 

(b) By new appointments of candidates who have passed a 
satisfactory examination for appointment as consul, as hereinafter 
provided. 

Sec. 3. That the Chief of the Consular Bureau, the Chief of 
the Bureau of Manufactures of the Department of Commerce and 



NATIONAL BUSINESS CONGRESS 263 



Labor, and the Chief Examiner of the Civil Service Commission 
shall constitute a board of examiners for admission to the Consular 
Service. 

Sec. 4. That it shall be the duty of the board of examiners to 
formulate rules for and hold examinations of applicants for admis- 
sion to the Consular Service. The scope and method of the ex- 
aminations shall be determined by the board of examiners, but 
among the subjects shall be included at least one modern language 
other than English; the natural, industrial, and commercial re- 
sources and the commerce of the United States, especially with 
reference to the possibilities of increasing and extending the trade 
of the United States with foreign countries ; political economy ; ele- 
ments of international, commercial, and maritime law. Examina- 
tion papers shall be rated on a scale of one hundred, and no person 
rated at less than eighty shall be eligible for certification. No one 
shall be examined who is under twenty^one or over forty years of 
age, or who is not a citizen of the United States, or who is not of 
good character and habits and physically and mentally qualified for 
the proper performance of consular work, or who has not been 
specially designated by the President for appointment to the Consu- 
lar Service subject to examination. 

Sec. 5. That whenever a vacancy shall occur in the eighth or 
ninth class of consuls which the President may deem it expedient 
to fill, the Secretary of State shall inform the board of examiners, 
who shall certify to him the list of those persons eligible for ap- 
pointment, accompanying the certificate with a detailed report show- 
ing the qualifications, as revealed by examination, of the persons 
so certified. If it be desired to fill a vacancy in a consulate in a 
country in which the United States exercises extraterritorial juris- 
diction the Secretary of State shall so inform the board of exam- 
iners, who shall include in the list of names certified by it only 
such persons as have passed the examination provided for in this 
Act, and who also have passed an examination in the fundamental 
principles of the common law, the rules of evidence, and the trial 
of civil and criminal cases. The list of names which the board of 
examiners shall certify shall be sent to the President for his in- 
formation. 

Sec. 6. That it shall be the duty of the board of examiners to 
formulate rules for and hold examinations of persons designated 
for appointment as consular assistant, or as student interpreter, and 



264 NATIONAL BUSINESS CONGRESS 

of such persons designated for appointment as vice consul, deputy 
consul, and consular agent, as shall desire to become eligible for 
promotion. The scope and method of such examination shall be 
determined by the board of examiners, but it shall include the same 
subjects hereinbefore prescribed for the examination of consuls. 
Any vice consul, deputy consul, and consular agent now in the 
service, upon passing such an examination, shall become eligible 
for promotion as if appointed upon such examination. All pro- 
posed promotions in the Consular Service shall first be approved by 
the examining board, which shall be advised by the Chief of the 
Consular Bureau in regard to the service records of the candidates 
for promotion. No promotion shall be made except for efficiency, 
as shown by the work that the officer has accomplished, the ability, 
promptness, and diligence displayed by him in the performance of 
all his official duties, his conduct, and his fitness for the Consular 
Service. No person who is not an American citizen shall be ad- 
mitted to the Consular Service as a consular assistant, vice or 
deputy consul, consular agent, or student interpreter. 

Sec. 7. That as between candidates of equal merit, appoint- 
ments of consuls general and consuls shall be so made as to secure 
proportional representation of all the States and Territories in the 
Consular Service ; and neither in the designation for examination or 
certification for appointment will the political affiliations of the 
candidates be considered. 

Sec. 8. That all appointments of consuls and consuls general 
of the United States shall be made to grades instead of to places, 
and the President shall make assignments to such places as he may 
deem proper. 

Sec. 9. That the United States Government shall bear the 
actual expense of transferring a consul or consul general, his fam- 
ily and his effects, when ordered to a new post. 

Sec. 10. That the Secretary of State shall report from time 
to time to the President, along with his recommendations for pro- 
motion, or for transfer between the Department of State and the 
Diplomatic Service, the names of those secretaries in the Diplomatic 
Service, who, by reason of efficient service, an accurate record of 
which shall be kept in the Department of State, have demonstrated 
special efficiency, and also the names of persons found upon exam- 



NATIONAL BUSINESS CONGRESS 265 

ination to have fitness for appointment to the lower grades of the 
service. 

Sec. 11. That the secretaryships in the Diplomatic Service are 
hereby graded and classified as follows : Class one, three thousand 
dollars, secretaries of embassy; class two, two thousand six hun- 
dred and twenty-five dollars, secretaries of legation; class three, 
two thousand dollars, secretary of legation and second secretaries of 
embassy; class four, one thousand eight hundred dollars, second 
secretaries of legation ; class five, one thousand two hundred dollars, 
third secretaries of embassy or legation. 

Sec. 12. That the board of examiners for the Diplomatic 
Service shall be composed of an Assistant Secretary of State, the 
Chief Examiner of the Civil Service Commission, or such other 
officer as that commission shall designate, a law officer of the 
Department of State, and one other officer to be designated by the 
Secretary of State. 

Sec. 13. That the scope and method of the examinations shall 
be determined by the board of examiners, but the examinations 
shall include business experience and ability, the resources and com- 
merce of the United States, with special reference to the develop- 
ment of export trade, international, commercial, and maritime law 
and history, American history, government, and institutions, and 
one language other than English. These examinations shall be held 
at least once annually, and shall be conducted with strict impar- 
tiality, and without regard to the political or other affiliations of 
any candidate, and upon their conclusion the board of examiners 
shall certify in writing to the Secretary of State the names of those 
persons whom they have found to be, in their judgment, thoroughly 
well qualified for the Diplomatic Service; and the report of the 
board shall be made public, and the Secretary of State shall at the 
same time make a public statement of the proportional representa- 
tion of the different States and Territories in the foreign service. 
No person who is not an American citizen shall be appointed to a 
secretaryship in the Diplomatic Service. 

Sec. 14. That examination papers shall be rated on a scale of 
one hundred, and no person with a general rating of less than 
eighty shall be certified as eligible. No person shall be certified as 
eligible who is under twenty-one or over forty years of age, or 



266 NATIONAL BUSINESS CONGRESS 

who is not a citizen of the United States, or who is not of good 
character and habits and physically, mentally, and temperamentally 
qualified for the proper performance of diplomatic work, or who 
has not been specially designated by the President for appointment 
to the diplomatic service subject to examination and subject to the 
occurrence of an appropriate vacancy. 

Sec. 15. That this Act shall take effect ninety days after its 
passage. 

Sec. 16. That all Acts or parts of Acts inconsistent with this 
Act are hereby repealed. 



NATIONAL BUSINESS CONGRESS 267 



RECEPTION AND BANQUET. 



Wednesday Evening. 



In Honor of the Speakers and Delegates of the Congress. 



Mr. Geo. W. Sheldon, President of the National Business 
League of America, acting as Toastmaster. 

Invocation by the Rev. Charles N. Stuart. 

Blessed art Thou, O God, Our Father, from whom cometh 
every good and perfect gift we enjoy. 

We give Thee thanks for the gifts of Thy love unnumbered by 
Thee and undeserved by us. 

Let the memory of Thy goodness fill our hearts with joy and 
thankfulness even to the end of life. 

Bless us in our fellowship here tonight. 

Bless our nation, state and city, bless all who are in authority, 
that law and order, justice and peace, may everywhere prevail. 

Bless those upon whom rest the burden and responsibility of 
great industrial and commercial enterprise, that by their manifest 
spirit of justice and brotherly kindness the happy day may come 
when all men's good shall be each man's rule through all the circle 
of the golden years. 

Direct us, O Lord, in all our doings with Thy gracious favor, 
and further us with Thy continual help, that in all our works, begun, 
continued, and ended in Thee we may glorify Thy name, and 
finally, by Thy mercy, obtain everlasting life, through Jesus Christ 
our Lord. Amen. 

The Toastmaster: Honored Guests and Members of the 
National Business League of America: Whatever of good may 
come out of this conference, it is primarily due to our worthy Gen- 
eral Secretary, Mr. Austin A. Burnham. (Applause.) 

He came to me some months ago and said that he believed that 
it was time that the business men of this country should get to- 
gether to consider their own welfare. He also felt that it was 
incumbent upon the National Business League of America to invite 
the business men to come to Chicago and deliberate upon the ques- 



268 NATIONAL BUSINESS CONGRESS 

tions which have been paramount before us for the past number 
of months and years. I hesitated some considerable time before 
giving my consent. But, thinking the matter over, it occurred to 
me that Mr. Burnham was right, and we proceeded along the line 
of getting the business men of this country together as far as we 
could to discuss, you might say, their own national affairs. 

The results of the deliberations of the past three days have 
been to me personally very satisfactory. We have not had a great 
quantity, but we have had much quality. We are satisfied that, 
within the next few months, the result of these three days' meet- 
ings will begin to make itself felt. Certainly it will, if the gentlemen 
who have been here attending this conference will do what they 
have suggested should be done, and what they have promised to do. 

I am not here tonight to deliver an address. I am not com- 
petent, but we have with us many who are competent to tell us 
what we ought to do, and I am sure that you are going to listen 
to them with a great deal of interest. 

I believe you will agree that it is a matter of fact and of his- 
tory that the men who are best equipped and whose services to 
their fellow-men and to their country prove to be the most prolific 
of lasting beneficial results, are the men who make . the least ex- 
ploitation of their accomplishments. With this in mind we are 
indeed fortunate in the selection of the first speaker of the evening. 
For nearly two decades he has been continuously active in the sci- 
entific fields of economics, industry, foreign and domestic com- 
merce, rail, ocean, and inland waterway transportation. Nor is this 
all. He was a leading member of the Isthmian Canal Commission 
that, through its thorough investigation and wise selection, gave to 
this country and to the world that crowning achievement of modern 
times — the Panama Canal. Hence it is my pleasure to present to 
you Professor Emory Richard Johnson of the University of Penn- 
sylvania. (Applause.) 

Professor Johnson : Mr. Chairman, Members of the Na- 
tional Business Congress: I wish first to express my appreciation 
of the honor you confer upon me by inviting me to be your guest 
this evening. I esteem it an honor, because I feel, as the Chairman 
has just stated, that if this country is to solve, really solve, the busi- 
ness questions which confront Congress and the States at the pres- 
ent time, it must be by deliberation of men whose daily life gives 
them an intimate knowledge of the problems to be considered. I 



NATIONAL BUSINESS CONG R E S S 269 

have been presented to you as a University man, and I plead guilty 
to the accusation; indeed, I am proud of the fact that I am con- 
nected with one of the universities of this country, but I do not 
appear before you tonight as a University man, but rather as a 
student with you of a very practical question, a question which I 
have sought to approach in no academic spirit, but in a spirit of 
truth-seeking, a spirit of attempting to arrive at an intimate knowl- 
edge of the problem. 

The Chairman has been kind enough to refer to the fact that 
I have been called upon by the Government from time to time to 
investigate and report. Such persons are usually harmless, and I 
assure you that my work for the Government has done business 
no injury, but at least it has done me good in that I have been 
thrown into close personal contact not only with professional men in 
engineering, men in the army and navy, but what I prize most of 
all, men in active business life. 

Without asking permission of your Chairman, I stole away 
from the meeting this morning in order that I might confer with 
the administrative heads of two of the leading commercial organ- 
izations other than the Business League, of the City of Chicago, and 
I shall return to Washington on Friday morning feeling that I have 
learned a great deal from what was told to me this morning by the 
men who were intimately concerned with the organization and de- 
velopment of the business in this great country, between the Alle- 
ghenies and the Rocky Mountains. 

I have, however, been asked to speak upon a very concrete 
question, that of the "MEASURES FOR THE PROMOTION 
OF THE AMERICAN MERCHANT MARINE." 

For fifty years the American marine engaged in the foreign 
trade has almost continuously declined. On the Great Lakes and 
along the seaboard, where only ships built and owned in this country 
may be employed, there is a prosperous fleet of six and a half mil- 
lion tons of high-class shipping ; but on the high seas where foreign 
competition must be met our marine has not been able to hold its 
own. 

It is not necessary to rehearse the causes that have brought 
this about. It is generally agreed that the causes are primarily 
economic — that it costs more to build ships in the United States 
than in Great Britain or Germany; that operating expenses are 
greater under the American than under a foreign flag; and that, 



270 NATIONAL BUSINESS CONGRESS 

such being the case, American capital seeks investment on the land 
rather than on the sea. These are obstinate facts, and all the more 
unpleasant to face for the reason that there seems to be no imme- 
diate prospect of their changing. 

If the hindrances to the increase of our over-sea fleet were 
mainly political or legislative we might hope to remove them 
promptly, and, by wise aid, to offset the minor handicaps of an 
economic character. Germany has shown this to be possible, and 
her deep-sea fleet is steadily increasing in spite of the fact that 
British builders and carriers have some economic advantages over 
the German. 

In part, the handicap upon our registered marine is due to laws 
that can be changed whenever public sentiment favors such action, 
and, I believe, the government can render some effective assistance 
in building up the merchant marine. The purpose of this address is 
to consider briefly what legislation is, and what is not, desirable 
in the interest of our registered shipping. 

The first thing to be done is to enable an American company 
to secure a ship as cheaply for operation under the American flag 
as under a foreign ensign. Our present registry laws make this 
impossible, and should be so changed as to allow Americans to 
purchase foreign-built ships for operation under our flag in the 
foreign trade. As long as ships can be secured for registration 
under a foreign flag for a third less than they can be obtained for 
operation under the American flag, it is idle to hope for any large 
increase in our international mercantile marine. That this is fact, 
not theory, is fully proven by our actual experience. 

The Commissioner of Navigation states in his current report 
that "the registry law has not compelled American capital to stay 
at home and directed its investment in the products of American 
shipyards. Yet," as he says, "unless the law can accomplish such 
an economic miracle, it can be of no benefit to shipbuilders, who 
have been disposed to regard it as essential to their existence." 
After a survey of the shipping built in the United States during 
recent years for the foreign trade, the Commissioner declares that 
"the sole product of the last ten years' operation of the registry law 
is the Minnesota, built in a shipyard specially prepared for the 
purpose, which has built no other steamer since." The Commis- 
sioner is entirely correct when he says that "a law which shows 



NATIONAL BUSINESS CONGRESS 271 

such meager results cannot stand the test of frank discussion," and 
that "if it were merely nugatory it might remain undisturbed." 

The effect of the registry law is not merely negative; it has 
restrained the increase of registered shipping in a very positive 
manner. Within a year it has prevented the American owners of 
a fleet of eighteen up-to-date steamships from transferring the ships 
from foreign to American registry. This fleet is operated in the 
trade between the United States and the West Indies and the coun- 
tries about the Caribbean, where, for political as well as economic 
reasons, the flag of the United States ought to occupy a place as 
prominent in commercial as in naval shipping. 

There is every reason to believe that the American shipyards 
would benefit rather than suffer by the repeal of the present law 
prohibiting Americans from purchasing ships abroad for registry 
under the American flag for operation in the foreign trade. An- 
other change in our laws, although of minor consequence, might 
be of some assistance to American-built ships. At the present time 
materials for the construction of steamships may be imported into 
the United States free of duty, but vessels built from imported 
materials cannot be employed in the coastwise trade of the United 
States for more than six months in the year. This limitation upon 
the use of a vessel must influence men investing money in ships to 
forego the privilege of engaging both in the coastwise and. the for- 
eign trade, and to cause capitalists to purchase their vessels abroad, 
register them under a foreign flag and to operate them solely in 
the foreign commerce of the United States. Our laws should en- 
able shipbuilders to construct, without restriction, vessels for the 
coastwise, as well as the foreign trade, with materials secured in 
the cheapest markets of the world. 

The opposition to ship subsidies in the United States is deep- 
seated. There has never been any prospect that Congress would 
grant general navigation and construction bounties such as have 
been given by France and some other countries. Indeed, the feeling 
against special aid to the merchant marine is so strong that it has 
thus far been impossible to modify the existing mail payment act 
of 1891 in such a manner as to render it of real aid to our merchant 
fleet. I believe, however, that continued effort should be made to 
convince the American people that it will be wise for them to adopt 
towards their merchant marine in the foreign trade, the policy that 
has long been successfully adhered to by Great Britain and that 



272 NATIONAL BUSINESS CONGRESS 

Germany has found to be effective in the promotion of her maritime 
interests. 

The fundamental weakness of the mail payment act of 1891 
as an agency for the promotion of our carrying trade on the seas 
is that it was enacted mainly to enable the people of the United 
States to maintain high-speed express steamers on the North At- 
lantic in competition with the British and German lines engaged in 
the transportation of passengers and express. Our foreign com- 
merce is amply provided with transportation facilities on the North 
Atlantic. The competition among steamship lines there is keener 
than in any other part of the world. The maintenance of a fast 
express steamship line on the North Atlantic under the American 
flag, for some time at least, will require very great assistance from 
the government, and the benefits to our commerce will be relatively 
slight. It may be well to continue to support one high-speed trans- 
Atlantic line, but the act of 1891 should be so modified as to enable 
the Postmaster General to bring into existence and to build up lines 
consisting of vessels of moderate speed, carrying freight and pas- 
sengers from the United States to South America and Asia. 

I do not advocate the immediate adoption of an elaborate pro- 
gram; indeed, I would have the act of 1891 modified with a view 
to giving strong government support only (a) to a line from the 
Atlantic seaboard down the east coast of South America as far as 
Buenos Ayres; (b) to a line from our Atlantic and Gulf ports 
down the west coast of South America to Valparaiso; and (c) to a 
line from our west coast ports to Hawaii, Japan and the Philippines. 

The fact should be recognized by the government that these 
three lines must secure most of their earnings from the transporta- 
tion of freight, and that the vessels must be so constructed and so 
operated as to transport freight profitably. Their speed must be 
moderate. In the case of the two South American lines the maxi- 
mum payment under the modified act of 1891 ought to be given to 
vessels with a rating of 13 or 14 knots and an actual average re- 
quired speed at sea of not more than 12 knots. This may seem to 
be providing for the transportation of mails at a slow speed, but it 
should be remembered that freight cannot be economically trans- 
ported in American vessels in competition with foreign shipping at 
a higher rate of speed than 12 knots. It should also be borne in 
mind that the German Government requires a speed of only 12 to 
14 knots of the lines to which it gives most of its subsidy — those 



NATIONAL BUSINESS CONGRESS 273 

through the Suez Canal to China and to Africa. Such a small 
percentage of the total earnings of lines from the United States 
to the east and west coasts of South America will be secured from 
the passenger and mail services that even liberal payments for the 
transportation of the mails may be entirely offset by a requirement 
that the vessels shall be operated at a speed of even 15 or 16 knots 
per hour. 

The lines across the Pacific might have enough passenger and 
express traffic to enable vessels to be operated profitably at an aver- 
age speed at sea of 14 knots. The mail contract with the trans- 
Pacific line might stipulate a theoretical speed of 15 or 16 knots. It 
will hardly be possible for vessels with a higher rating to maintain, 
under the American flag, profitable services in competition with 
ships under the Japanese and British flags. 

In providing public aid for the American marine it will hardly 
be necessary to subsidize any portion of the coastwise fleet. For- 
eign vessels are not allowed to engage in the trade between the ports 
of the United States, and, thus entirely freed from foreign com- 
petition, our coastwise fleet has increased rapidly in tonnage and 
efficiency. In 1900 the enrolled tonnage on the Atlantic and Pacific 
coasts amounted to 2,216,516 tons; in 1910 the tonnage had risen to 
3,540,519 tons, a gain of nearly 60 per cent during the decade. The 
opening of the Panama Canal will give much larger opportunity 
for the development of the coastwise shipping. The demand for 
transportation by water from coast to coast will be much greater 
than at the present time, and it may be confidently expected that 
shipping will be brought into service in response to and in propor- 
tion to commercial demands. 

Fears have been expressed that the carriers engaged in the 
coastwise trade between the two seaboards may experience difficulty 
in competing with the transcontinental railroads. On the other 
hand, there is equally strong apprehension on the part of the rail- 
roads that a large share of the traffic between the eastern and west- 
ern parts of the United States will, after the opening of the Canal, 
be handled coastwise. 

My own judgment is that the water lines will undoubtedly be 
able to compete successfully with the railroads and that the volume 
of business moving coastwise will be large. At the same time, I 
do not apprehend that the Canal will prove to be an injury to the 
transcontinental railroads or that it will handicap their development. 



274 NATIONAL BUSINESS CONGRESS 



The Canal will undoubtedly compel some readjustment of rail rates 
to and from the Pacific coast terminals. It will also draw to the 
Atlantic seaboard some traffic from west of {he Allegheny Moun- 
tains that now moves directly by rail to the Pacific. The railroads 
will, of course, find it necessary to divide with the steamship lines 
some part of their coast-to-coast traffic; but it may easily transpire 
that what the railroads may lose in traffic will be more than offset 
by what they gain in freight and passenger business as the result 
of the industrial and commercial development which the Canal will 
bring about. The effect of the Canal will be to increase the traffic 
handled from coast to coast and also to develop the industries of 
both the seaboard States and of the wide mountain territory crossed 
by the transcontinental railway lines. It is this broad intermountain 
territory that now supplies the transcontinental railroads with the 
major share of their tonnage and profits. If the Canal succeeds in 
promoting the industries both of the seaboard and intermountain 
States, in other words, if the Canal really secures a large traffic, 
the railroads are certain to be the ultimate gainers. Personally, I 
believe they will not be losers, even during the early years of the 
operation of the Canal. 

The Canal will supplement the railroads not only by developing 
the industries of the West, but also in a more direct manner. I 
assume that the leading transcontinental railroads from the Grand 
Trunk and Pacific on the north to the Southern Pacific on the south 
will, unless prevented by discriminating canal tolls or other re- 
straining legislation, establish strong steamship lines through the 
Canal — lines that will supplement the services of the railroads as 
do the present lines on the Great Lakes and upon the Pacific. 

It being certain that the railroads will establish coast-to-coast 
steamship lines, unless prevented from doing so, there are those 
who fear that it will be impossible for lines independent of railway 
ownership or control to compete successfully with the steamship 
lines having railroad affiliations. Accordingly, it has been sug- 
gested that the Government should either prevent the railroads 
from operating steamship lines or should make the Panama Canal 
tolls so high for railroad lines as to prevent them from being oper- 
ated. If the railroads are not allowed to operate steamship lines 
through the Canal, the commercial usefulness of that great water- 
way may be limited; whereas, it will be agreed that the policy of 






NATIONAL BUSINESS CON G R E S S 275 

the United States should be to make the Canal of maximum service 
to the commerce of the United States and to the world at large. 

If it be feared that the steamship lines under railroad control 
or with railroad affiliations may engage in destructive warfare 
against the independent lines, the measures to be adopted are those 
that will so regulate coastwise carriers as to maintain fair competi- 
tion among all lines. Protection can be afforded to independent 
lines by federal regulation of services and rates of coast-to-coast 
shipping. Moreover, the regulation can be so enforced as to pro- 
mote rather than to restrict the use of the Canal. In our zeal to 
adopt measures that will prevent the railroads from throttling the 
Canal, we ought not to limit the use of the waterway. Regulation 
rather than limitation is desirable. 

While it seems necessary and desirable to give government aid 
to the American marine engaged in the foreign trade, I am not over- 
sanguine as to any large growth in our registered shipping in the 
near future. The economic disadvantages of the American marine 
as compared with those under foreign flags are serious and cannot 
be outgrown in a day ; nevertheless, I believe that with wise govern- 
ment support, steady, if not rapid, progress can be made in building 
up our deep-sea tonnage. Certainly, earnest and practical effort 
should be made to strengthen the American marine in the inter- 
national trade. 

The logical method of aiding our merchant marine in the for- 
eign trade is, first, to admit to American register for that trade 
vessels built abroad and owned by American citizens ; and, second, 
to give effective government support to three lines of freight and 
passenger steamers of moderate speed, one to the east coast and an- 
other to the west coast of South America, and a third across the 
Pacific. 

I trust that measures may be taken by Congress at an early 
date to remove the present legislative handicap upon the American 
merchant marine in the foreign trade, and that the act of 1891 may 
be so amended as to enable the Government to make it a means of 
aiding our over-sea carrying trade. The opening of the Panama 
Canal should be preceded by measures that will foster the develop- 
ment of the American merchant marine. (Applause.) 



276 NATIONAL BUSINESS CONGRESS 

4 THE PANAMA CANAL AND THE COMMER- 
CIAL AND TRANSPORTATION 
INTERESTS. 



By Emory R. Johnson, 

Professor of Transportation and Commerce, University of Pennsylvania. 

(From the Nezv York Journal of Commerce Bulletin of January 3, 
1912. Reprinted as kindred to Professor Johnson's Address.) 

The Panama Canal, now within two years of completion, is 
being constructed to aid the industry and commerce of the United 
States and to increase the effective strength of the American navy. 
The effect which the canal will actually have upon the industrial 
and commercial development of the United States, as a whole, is not 
easy to determine; indeed, careful analysis can only indicate the 
more important changes to be expected. 

The most general influence of the Panama Canal upon Amer- 
ican trade will result from increasing transportation facilities. A 
fact of fundamental importance, and one often overlooked, is that 
the development of industry and commerce depends more upon the 
completeness of the transportation service than upon the cheapness 
of freight rates. The absolute cost of transportation today is so 
small as to impose but a slight restraint upon trade, but facilities 
which aid new transportation services often make possible a large 
expansion of commerce. 

The steaming time between New York and San Fransico (in- 
cluding a half day for passing the Canal and another half day for 
coaling at the Isthmus) will be about 23 days for 10-knot ships and 
19 days for 12-knot vessels. The present time taken by the rail- 
roads for moving carload freight from the Atlantic to the Pacific 
seaboard is about three weeks ; thus freight vessels will have ap- 
proximately the same schedule as freight cars. Fifteen-knot ves- 
sels will make the run between New York and San Francisco in 
15 or 16 days, including a day for detention and coaling at the 
Isthmus. Vessels with a speed of 15 knots are of the passenger 
rather than the freight class, and will probably not be operated in 
large numbers. The only considerable passenger traffic between 
the two seaboards will consist of immigrants west-bound and of 
excursionists in both directions. The Panama Canal is to be re- 



NATIONAL BUSINESS CONGRESS 277 



garded as a coastwise highway for freight rather than for passen- 
gers. 

The opening of the Panama Canal will change the conditions 
of industrial competition, and the benefits will not all be secured by 
the United States. Half of the traffic passing the Canal, at least 
during the first decade of its operation, will not touch the shores 
of the United States at all — it will be the commerce of Europe 
with western South America, and, to some extent, with other sec- 
tions of the Pacific. While the United States will trade with for- 
eign Pacific countries under more favorable conditions than exist 
at present, the same will be true of Europe, which now has a long 
lead over the United States in the trade of most sections of the 
Pacific. The Canal will enlarge our trade with Western South 
America, but Europe will also expand her commerce with that 
region. 

The competition between Europe and the eastern part of the 
United States for the trade of our Pacific Coast States will be 
keen. Great Britain, Germany and other European countries will 
have especially low freight rates to the west coast of North Amer- 
ica, because the larger volume of traffic moves east-bound. Vessels 
from Europe to our west coast will be as eager as they now are to 
secure cargo at low rates to prevent movements in ballast. The 
United States Steel Corporation and other American producers 
will be obliged to sell their products in the western part of the 
United States in constant competition with the British, German and 
Belgian manufacturers. The tariff will aid the Steel Corporation, 
but even present tariff rates are not high enough to prevent foreign 
producers, assisted by low ocean rates, from selling profitably in 
our West Coast markets. 

Competition between the industries in Eastern Seaboard States 
and those in the States of the Mississippi Valley will be accentuated 
by the Canal. The testimony presented to the Interstate Commerce 
Commission in the intermountain rate cases showed that about 
20 per cent of the west-bound traffic of the transcontinental rail- 
roads originated in the territory east of the Buffalo-Pittsburg dis- 
trict, that about 23 per cent came from the Buffalo-Pittsburg dis- 
trict, and 57 per cent, more than one-half, from the Middle West. 
For some years there has been a steady westward movement of 
industry from the Atlantic Seaboard to the States west of the 
Allegheny Mountains ; and not a few producers in the valleys of the 



278 NATIONAL BUSINESS CONGRESS 



Ohio, Mississippi and Missouri rivers are apprehensive lest the 
Panama Canal may check this westward movement of industry and 
enable the Seaboard States to secure a larger percentage of the 
trade in the markets of the West Coast. The transcontinental rail- 
roads share this apprehension. To what extent the Panama Canal 
will draw industry back to the Atlantic Seaboard cannot be pre- 
dicted in advance of the opening of the Canal; but it is probably 
safe to assume that the producers and carriers of the Middle West 
will find some effective method of dealing with the situation that 
may develop. 

The influence which the Canal may exert upon the development 
of the Rocky Mountain States is deservedly receiving much atten- 
tion. During recent years the rivalry between the cities of the In- 
termountain States and those of the Pacific coast to become domi- 
nant centers of industry and trade has grown stronger. It is the 
hope of the seaboard cities that the Canal may aid them in retaining 
their present commercial supremacy. 

The present system of transcontinental rail rates will assist 
the Pacific coast terminals in retaining the distributive trade of the 
West, and the future growth of the intermountain cities will be 
largely influenced by the interpretation which the Supreme Court 
may put upon the long-and-short-haul section of the Interstate 
Commerce Act. If the decision of the Interstate Commerce Com- 
mission establishing a percentage relationship between the rail rates 
to the seaboard and to intermediate points shall prevail, the Canal 
will be of greater assistance to the industrial development of the 
Mountain States than it will be if the present system of rail rates 
shall be allowed to stand. 

Railroad officials in all parts of the United States are consider- 
ing the probable effects of the Canal upon through traffic and rates. 
Of course, everybody realizes that most of the traffic handled coast- 
wise through the Canal will be transported twice by rail and that 
the local traffic of the railroads within five hundred miles of each of 
the two seaboards must be increased by the Panama Canal. As the 
railroads must collect and distribute most Canal traffic, they must 
gain rather than lose, if the Canal is a success. 

The growth in the volume of through rail traffic between the 
two seaboards and between the Mississippi Valley and the west 
coast may be temporarily slackened by the Panama Canal, but even 
this is not certain. It is impossible to determine in advance the 



NATIONAL BUSINESS CONGRESS 279 

extent to which the character of the service performed by the rail- 
roads will enable them to hold traffic in competition with the coast- 
wise steamships which can and will handle traffic at appreciably 
lower rates. The citrus fruits from Southern California, for in- 
stance, will probably be shipped by rail, for the most part, after 
the Canal is opened, although the faster steamships may be expected 
to equip themselves with refrigeration facilities in proportion to the 
demand. Fruit is dispatched from Los Angeles in trainload lots 
for the eastern part of the United States, and,' after the train is 
dispatched, the cars of fruit are severally consigned to various 
destinations. Such being the manner of conducting the business, it 
is the opinion of well-informed transportation men that the fruit 
markets east of the Allegheny Mountains, at least, will be supplied 
by direct rail lines rather than by a combined water and rail route. 
It is probable also that the shippers of many commodities may 
prefer all-rail services directly from the producer's factory to the 
consignee's store or warehouse, without transfer of freight in 
transit, to the less expensive service involving transportation by two 
railroads and a steamship line, with the necessary rehandling of 
goods en route. 

It is not to be expected that the Canal will bring about the 
general reconstruction of transcontinental railroad rates. The rail 
rate structures will be maintained after the Canal is opened and 
railway officials will wait to see how traffic moves. If they find 
that the Canal route is getting a large share of the through business, 
some readjustment of through rail rates will necessarily be made. 
The extent to which the transcontinental rate structures will be 
modified will depend upon the Supreme Court's interpretation of 
the fourth section of the Interstate Commerce Act. There will be 
no general rate warfare started by the railroads against the steam- 
ship lines; the railroads will have too much at stake; warfare will 
be too costly. It is much more probable that several of the trans- 
continental railroad systems will do what the Southern Pacific is 
certain to do, that is, establish steamship lines between the two sea- 
boards. 

The steamship lines operated through the Canal by the rail- 
roads may be expected to carry traffic at profitable rates, and to 
supplement the services of all-rail lines. It will be in the public in- 
terest to permit the railroads to establish as many steamship lines 
as they may wish to operate from coast to coast. If it should be 



280 NATIONAL BUSINESS CONGRESS 

necessary to regulate the services of the coastwise carriers, in or- 
der to maintain fair competition between railway and independent 
coastwise lines, the jurisdiction of the Interstate Commerce Com- 
mission may readily be extended over carriers by water between the 
two seaboards of the United States. 

The coastwise steamship interests are eagerly awaiting the 
fixing of Panama Canal tolls. It is assumed that the payment by 
the Government of the tolls upon American ships will be of signal 
assistance to the coastwise shipping. As a matter of fact, Panama 
Canal tolls will hardly be burdensome to shipping. They will add 
possibly 5 per cent to the average freight rates between the two 
seaboards of the United States. Likewise, the hope of the trans- 
continental railroads that the Canal tolls will assist them in com- 
peting against the coastwise steamship lines can hardly be realized. 
An addition of 5 per cent to the rates charged by coastwise carriers 
can be of but slight help to the railroads. The division of the 
traffic between rail and water lines will not be largely affected by 
such tolls as the United States Government will probably charge for 
the use of the Panama Canal. 

The Toastmaster: I could not introduce to you, gentlemen, 
the next speaker, that is, particularly to our Chicago friends, be- 
cause he is known to every man, woman and child in Chicago. To 
those who do not live in Chicago, and who read, I am sure they 
have all heard of George M. Reynolds. I said I could not introduce 
him; I present him. (Applause.) 



PRESSING NEEDS FOR CURRENCY LEGIS- 
LATION. 



Address by Mr. George M. Reynolds, 

President of the Continental and Commercial National Bank of Chicago. 



Mr. Reynolds : Mr. President and Gentlemen — Enveloped 
as we are in an atmosphere of conviviality and good cheer, 
it seems almost a crime to inject into this meeting a question 
so serious and so dry as the discussion of the financial question. 
Notwithstanding the conviviality of the evening, I am glad to note 
that none of us seems to be in the condition of the man who, having 
been invited to a function, went early, met all the guests, had a 



NATIONAL BUSINESS CONGRESS 281 

little visit with them, and in a short time went from one end of 
the room to the other shaking hands, bidding them good-bye. A 
friend met him and said: "John, you surely are not going home 
now? The frivolities are just going to begin." "No," John re- 
plied, "I am not going home now, but I want to bid you all good-bye 
while I know you." (Laughter.) 

Speaking of conviviality, reminds me of the crowd of gentle- 
men who, after having left a gathering of this kind, and were on 
their way home, assembled in front of a house and delegated one 
man to go to the door and ring the door bell. After a considerable 
wait a lady's head appeared at the second story window, and one 
gentleman said: "Are you Mrs. Smith?" She says: "I am." He 
says : "Please, come down and pick out Mr. Smith ; the rest of us 
want to go home." (Laughter.) 

Now, gentlemen, when I look into the faces of this distin- 
guished gathering and recognize so many men who have been so 
conspicuously successful in various lines of business, I am ex- 
tremely diffident to undertake to discuss with you this question of 
currency legislation, or the need of it, for the reason that I know at 
the very outset I shall not be able to say much that will either in- 
struct or entertain you. About the only apology I can offer for 
appearing before you at this time is the obsequious manner in which 
the Committee of the National Business League of America called 
upon me, when they extended this invitation to me to be present 
to-night. They came into my office with soft step, with heads 
bowed low, and with an obsequious demeanor talked so pleasantly 
that when I reflected that the occasion was so long in the future 
I was induced to accept the invitation, feeling that I would have 
ample time in which to properly prepare myself to discuss the 
subject before this distinguished body gathered here to-night. Up 
until noon to-day I was still convinced that I would have an oppor- 
tunity to make that preparation, and I confidently expected to 
leave my office at 12 o'clock to-day and spend the rest of the time 
in the seclusion of my own room preparing myself, but as usual 
some unexpected things happened and I did just get home in time 
to change my clothes before coming here; so I appear before you 
to-night with not even a suspicion of a prepared thesis, but rather 
to discuss in a conversational way a question which seems to be 
of vital importance to the business interests of this country. In- 
deed, I think the financial question is the most important question 



282 NATIONAL BUSINESS CONGRESS 



engaging the attention of the people of this country at the present 
time. 

It seems to me so much has been said upon the necessity of 
currency legislation that it would be a waste of time for me to 
undertake to make any reference at all to the present national 
banking system, and I shall not attempt to do so, but rather I shall 
endeavor to bring to your attention some of the salient points 
which, to my mind, should be given consideration and which call for 
legislation. 

It would require much more time than that which has been 
placed at my disposal to-night in order to make anything like a 
comprehensive presentation of this subject, and I must, therefore, 
content myself with presenting, more or less at random, different 
thoughts that may come to my mind in connection with this subject. 

I am not here to find fault with our present national banking 
system, notwithstanding the fact that I feel it is very inefficient in 
many respects, for I think, all things considered, it has served us 
fairly well. It was the outgrowth of conditions at the close of the 
war which created a necessity for the adoption of a banking system 
on the one hand and the making of a market for securities of the 
Government on the other hand. The establishment at that time 
of the national banking system, in view of the volume of business 
in this country, seems to have been a fairly good one; it served a 
double purpose and gave stability to the values of government se- 
curities. 

The fact, however, that the bond secured national bank note 
is inelastic has been discussed so many times and from so many 
points of view that I will not touch upon that subject. 

I want to say that, in my opinion, the reason the present na- 
tional banking law has served the country as well as it has, with 
no more frequent depressions and visitations of seasons of panics, 
is due to the growing use of credit in business transactions in this 
country. Indeed, so rapid has been the growth of the use of credit 
in our business transactions, we are told to-day that about 96 per 
cent of the business of the country is done upon credit. Therefore, 
it seems to me that what means the most for the protection of the 
business interests of this country is that which will give the greatest 
measure of protection to the credit of the country ; and it is my pur- 
pose, in the brief time that I have to-night, to devote my remarks 
almost entirely to that phase of the necessity for currency legisla- 



NATIONAL BUSINESS CONGRESS 283 



tion, because I believe that almost every man within the sound of my 
voice will know something of, and has to do more or less with, 
credits. 

The fact that 96 per cent of our business is done upon credit 
makes credit a most vital force in all business, as it is one of the 
most important factors in economics, and if that credit is stable, 
it must be protected by a system of currency and banking which 
will enable us in times of stress or storm to exchange credits of 
one form into credits of another form. To illustrate this, I will say 
that, in the transactions of business we have many forms of credits. 

The initial form of credit might properly be said to be one 
created in a transaction between two individuals. We will say 
that A and B have a business transaction, the result of which is 
that A gives to B his note; B, in the acceptance of the note, has 
at the time being no thought of the necessity for the use of that 
credit in his own business and he is perfectly willing to accept it. 
Later on a condition arises through which B needs to use the credit 
which he has taken from A. He wants to use that in another 
transaction with, we will say, C. Inasmuch as his transaction 
with C involves a different amount from the one had with A, and 
furthermore C having no knowledge of the financial responsibility 
of A, the only way by which he can use this credit is to take the 
note of A to the bank and discount it. If he takes credit for the 
proceeds of the note, he may then conclude his second transaction 
by giving his check upon the bank, which he does in the usual 
course of business. That transaction has transferred or changed 
the credit of A into a different form of credit, or a bank credit, 
which is discharged through the use of a bank check. If, however, 
his transaction is to be with someone to whom he is unknown and 
that person may be uncertain as to whether or not he has the money 
in the bank, he may discount the note and get a bill of exchange on 
some other point, transferring through this process the credit of 
A into a still different form of credit. As the party receiving the 
check from B, or the bank's bill of exchange, as the case may be, 
may possibly be someone who intends to leave the community, and 
intends to go to some remote section of the country, where the 
bank upon which it may be drawn may not be known, he may 
require a different form of credit. In which event he exchanges 
B's check or the bank's bill of exchange, whichever it may be, into 



284 NATIONAL BUSINESS CONGRESS 



still another form of credit, which is currency, and the bank gives 
him bank notes. 

Now, through these natural processes we see the credit cre- 
ated in the individual transaction between A and B exchanged into 
and for other forms of credit and used in other business trans- 
actions until it at last reaches the stage of the bank note, which 
is generally known and accepted all over the country, and, there- 
fore, is regarded as the highest form of credit. 

I contend, my friends, that a proper system of banking is that 
which will give adequate protection to the credit of this country. 
A system which will make it possible, in the ordinary transactions 
of business, to exchange one form of credit into another, so that 
if you have A's note, or B's, or C has B's check, or C has the bank's 
letter of credit, they all can be exchanged back into one form or 
other of credit to suit the convenience of the parties to the trans- 
action. 

Now, under our existing banking and currency laws, that is 
impossible. The fact that our national bank notes are inelastic 
and that they are secured by Government bonds makes it impossible. 
So that a system of banking and currency which will give proper 
protection to these credits is, in my opinion, of pressing necessity at 
this time, and it is to urge the adoption of some legislation which 
will provide this facility in some form or other that I appear before 
you to-night. 

Under present conditions the amount of credit which can be 
extended in any community, in the relations of that community with 
its banks, must be measured entirely by the relationship between the 
reserves in the vaults of the banks and the outstanding credits of 
those banks. It makes no difference what the credit requirements 
of your community may be, you are limited to only that amount of 
credit which is permitted by the reserve laws in the maintenance of 
the prescribed relation of the money in the vaults of the banks and 
the credits which the banks have extended. 

A bank in any community is, therefore, a dealer, not in money 
as is oftentimes supposed, but in credits. Indeed, it is one of the 
chief functions of a bank in any community to collect the credits 
on the one hand and the debits on the other, and offset them. 

To illustrate: A bank in an agricultural community collects 
the credits which are made for that community through the sale 
of its products and the shipment to market of its grain and the 



NATIONAL BUSINESS CONGRESS 285 



livestock. If the business of that community could be divided into 
seasons and for six months of the year the profits of that com- 
munity could be accumulated, it would result very largely in the 
increase of the deposits of its banks; and, if that were the only 
part of the transaction, at the season of the year when the crops and 
the livestock had been moved to the market, the deposits of the 
banks would show the highest point of the year. But all the while 
there is another process going on, for, while that community may 
raise wheat, oats and live stock in abundance and in excess 
of their own requirements, they do not produce dry goods, gro- 
ceries, hardware, etc. So while they are exporting their products 
to the different markets of the world they are importing products 
which they do not produce, and those products are paid for by 
checks upon the banks of the merchants buying bills of exchange 
sent to the cities from which the commodities are purchased. In 
that way and through that process the bank in a local community 
is always offsetting the credits of the community with its debits, 
and the only use for money that the bank has itself is to take care 
of the credits going farther away from home than usual, and which 
have not yet discharged their duty and returned to be charged up 
on the books and offset by the debits on the other side. 

For fifty years, nearly, we have had a rapidly changing con- 
dition in this country. The rapid development of the country, 
causing an increasing area of land to be brought under cultivation, 
has widened our scope of activities constantly, and this process of 
extending our credits, through the use of credit in business, has 
gone on continually, until we have, in my opinion, reached a point 
where the reserve balances against the credit needed for the trans- 
action of our business are about as small as we can consistently have 
them. 

Under the law requiring reserves the various banks of the 
country to-day, in an effort to increase their reserve, must of neces- 
sity draw against their correspondents in other cities, and thereby 
deplete the reserves of those cities. So that any effort on the part 
.of banks generally to replenish their reserves must tear asunder 
the reserves at other points. Consequently, when a season of un- 
rest occurs, when business men have some apprehension about an 
ability to get money or to get credit, and banks undertake to re- 
plenish their own reserves, because of this unsettled confidence, 



286 NATIONAL BUSINESS CONGRESS 



chaos is created, and if we are not careful we are plunged into a 
condition like that of 1907, when we were in the midst of a panic. 

Personally, I contend that there has never been a panic in the 
world that has not come subsequent to an inability on the part of 
the solvent business men to secure credit. So long as your checks 
answer the purpose of currency in their transactions — and they do 
answer that purpose so long as they are out serving that purpose — 
you^have no need of currency and no desire for it. 

If you will reflect, you will all recall that in the fall of 1907 
there was no effort made whatever upon the part of the public to 
hoard money until after the banks of the country were obliged to 
refuse to extend credit to them. And, indeed, I believe, that if in 
the panic of 1907 $500,000,000 more of credit could have been 
offered to the business interests of this country the panic of that 
year would have been averted. Now, if I am correct in this 
theory, the thing that we most need in the correction of our cur- 
rency system is to have adopted some law which will provide an 
institution or some vehicle of some kind which will protect our 
credits to an extent, first, that will have an ability to transfer credit 
of one form into credit of another form, or whatever form we 
may care to have it, even to the securing of bank notes, which 
phase I will touch upon later. 

Then we must have established in protection to our credit an 
institution which will have the right under the law, to issue credit, 
under the proper safeguard. I contend, therefore, that legislation 
should provide for at least three essential things : First, it should 
have a credit creating power ; second, it should have the right to 
issue its own notes, properly secured and safeguarded ; and, further- 
more, -whatever is provided shall safeguard against over-expansion 
of credit. 

Now, gentlemen, you all well know that the country has had 
submitted to it for its consideration at this time a plan for the 
revision of our currency and banking laws, proposed by the Chair- 
man of the National Monetary Commission, and while I know full 
well that that plan will not meet the views of everybody — indeed, 
I doubt that it will meet the full views of anyone who has to do 
with the subject — still, from my point of view, having been actively 
engaged and associated with those who have had to do with the 
framing of that bill, I say I firmly believe that in the consensus of 



NATIONAL BUSINESS CONGRESS 287 

opinion of the business men of this country it represents the best 
thing possible that we can get at this time. (Applause.) 

At the very beginning of the study of this question the first 
and foremost problem that confronted those who had the work 
in charge was its political aspect; the ability, if you please, to have 
the bill passed, was infinitely greater than the economic problem. 
The bill was presented to the country in a tentative form for con- 
sideration some months ago. Since that time there has been much 
discussion and some criticism of it. Some amendments have been 
made to the bill with a view of covering or meeting such criticism, 
and, in my opinion, the revised plan, as it is now presented to the 
people for consideration, is about as nearly fitted to take care of 
the needs of business as anything which we can hope to have 
adopted. 

It is to be regretted that legislation of such importance as this 
must bow to and be hindered more or less by the prejudices of 
the people of this country. I recognize that this is perhaps the 
most inopportune time to have legislation of this "kind come up for 
consideration, and, furthermore, following as it does upon the 
heels of tariff legislation, that the criticism created as the result of 
that legislation is a handicap against this bill to no inconsiderable 
extent. I recognize that prejudices have been aroused, and I know 
there are many people who profess to know nothing about the bill, 
but who are opposed to the author and, therefore, opposed to the 
bill. Now, I am here to-night to defend no one, nor am I here to 
criticise anyone, yet I feel that I would not be doing my duty if 
I did not have the moral courage to say to you, gentlemen, as a 
result of having sat in almost every conference which has been 
held upon this subject by those in authority in the preparation of 
the bill, that I believe the most honest and conscientious thought 
has been given to it by those who have had it in charge. I want to 
say, furthermore, that I believe the entire bill has been constructed 
around the one premise, to begin with, that the individual banks 
throughout the country should not be disturbed; that they should 
continue their entity; that they should not be threatened by the 
establishment of governmental competitive banking in this country. 
But, strange to say, while the bill was constructed upon this 
premise, with the foremost thought in the minds of those who had 
to do with it being the conservation of our present individual 
banks, some 25,000 in number, the first criticism we had of the 



288 NATIONAL BUSINESS CONGRESS 



bill came from that source. I think a careful study of the plan 
by them has convinced the average banker in the country that the 
bill is not calculated to destroy him, but on the contrary that it 
is proposed to be helpful to him. 

I cannot, in the few minutes at my disposal, undertake to go 
into any special detailed discussion of this plan. You all know 
what it is; you have heard it discussed, and I have no doubt but 
that you have all read it. In my judgment, it will come as nearly 
serving our purposes as any plan which can be suggested, although 
those who have this work in charge recognize that they have many 
handicaps to contend with; they expect they will stub their toes 
frequently, and fall perhaps, but, feeling conscious that their work 
has been along the right line, they will get up and push forward 
until success crowns their work. 

I believe that it is especially unfortunate that legislation so im- 
portant as currency legislation should be made the tail to the tariff 
kite — and that is about the position in which the bill was sought to 
be placed by a number of people. That is wrong. I do not agree 
with the tariff schedule as it was made. I do not agree with the 
views of those who had the framing of the tariff schedule. I do 
not agree with them in many things, yet I hope I am too broad- 
gauged and too fair-minded to allow my prejudices to stand in the 
way of recognizing that which is good presented by those people, 
or by anyone else for that matter. For myself, I believe that I 
should take the mote out of my own eye before I look for the beam 
in my neighbor's. And I believe that so long as we approach the 
discussion and the settlement of these questions in the spirit of 
prejudice just so long are we going to have the contention which is 
interfering with our business at this time. 

I am reminded at the moment of a little story that I saw in 
the paper a few nights ago. Some place in the city a water main 
had been broken, and an employe of the city had taken a wrench 
and gone to the hydrant and was turning it round and round and 
round, shutting off the water in order that they might get down to 
the main to repair the break. When he was about half through 
with his task he felt a tap on his shoulder, and, looking around, 
found a tipsy man, who said: "I have caught you at last." Says 
he : "My friend, somebody has turned these streets around here 
for a great many years, but, thank God, we have caught you at 
last." (Laughter.) 



NATIONAL BUSINESS CONGRESS 289 



I want to tell you there has been some one turning public 
sentiment around for years, and it is about time we had caught 
him. (Applause.) We are not going to catch him until you put 
your prejudices behind you and go about it in an intelligent, honest, 
fair-minded way. 

I recognize this currency question is going to be considered 
from many viewpoints, and I have no doubt many of you will differ 
from me in your views ; that makes no difference. I welcome open- 
minded, fair discussion, because I believe it will lead to a study of 
the bill, and I believe the more people who study the bill the more 
inclined they will be to come to a realization of the fact that it is 
the best bill under all conditions it is possible for us to get through 
at this time. 

I want to say that so far as the author of the bill is concerned, 
it is not Mr. Aldrich's bill, nor the bill of any one man. It is the 
creation of many men. Perhaps one hundred men have had to do 
with its construction in one form or other. It represents the con- 
sensus of opinion of many of the largest banking men and business 
men of this country. Conference after conference has been held 
on the subject. I have attended conferences when there were 
present twenty-five to forty people from different sections of the 
country, each one having gone with a view of picking the bill to 
pieces and criticising it from the standpoint of the benefit it would 
be with respect to their own communities. After a comprehensive 
discussion, however, they would withdraw practically all of their 
criticism, for they found that the bill embodied the features they 
thought ought to be in it, when it was properly analyzed and they 
properly understood it. 

And now there have been several bogies raised ; they are always 
raised over questions of national importance. I have to smile when 
I think of some of them : "Wall Street." You ask the average 
man who criticises Wall Street why he criticises it, and he doesn't 
know ; it is just Wall Street. 

I cannot refrain from telling you a little story bearing upon 
this subject. About eighteen months ago I was out at Kansas City 
-and I met one of those fellows who held that Wall Street ought 
to be regulated. He stood in the lobby of the hotel, and, knowing 
that I was from Chicago and a banker, he talked very drastically 
about capital and capitalization, and money and credits, and all that 
sort of thing, until, after a short time, realizing that he was talking 



290 NATIONAL BUSINESS CONGRESS 



for my benefit, I said: "My friend, I may be mistaken— I have 
no inclination to intrude here if you don't mean me, but if you are 
talking to me I will be very glad to hear you, provided you will 
divide time." He replied : "I will be glad to." I asked : "What 
is your business?" He replied: "It is real estate." I asked him 
if he lived in Kansas City and he said he did. I asked him where 
he sold real estate, and he said : "In Mexico and Texas." I said : 
"Do you sell it for cash ?" He answered : "No ; I sell it on from 
two to ten years' time." I said: "How do you get your people 
out there to see it?" He answered: "By the railroads." "You 
don't use the railroads to take your men down there to sell your 
real estate after all the talk you have given me about railroads?" 
I asked. He replied: "Yes; sure." I said: "Do you sell for 
cash ?" "No," he replied, "I usually get a reasonable payment down 
and give credit for from three to ten years' time on the balance." 
I said: "It takes a great deal of money, does it not, to handle a 
business of this character?" and he said, "Yes." I asked him how 
he got the capital. He said: "If I sell a piece of land to a man 
in Illinois and the man is good, I can go to the banker in the 
locality where he is living and discount the note ; the local banker 
knows he is good and for a liberal discount will purchase the note 
from me." I said: "I suppose you do not feel that you are 
speculating?" and he said, "Oh, no, certainly not." I said: "Do 
you know that a man on Wall Street knows where he stands every 
night? His transactions are all on the basis of cash." 

I then asked: "What makes your city great here?" "Why," 
he says; "we have sixteen or seventeen distinct lines of railroad 
running out of here." 

I says : "If one railroad is such a terrible thing, sixteen must 
be awful. What is that car down there?" He answered: "That 
is a Pullman car — sleeping car." 

I asked him who owned it, and he said : "The Pullman Com- 
pany in Chicago." I then asked : "What is it there for ?" He re- 
plied that it was for the convenience of "our people." 

After further questioning he admitted that he could go to bed in 
that car there in Kansas City, sleep all night as comfortably as he 
could in his own bed and wake up in the morning in Chicago 
refreshed from his night's rest. 

And I then asked: "What is that viaduct down there for?" 
He replied : "That was built to save lives. People go down there 



NATIONAL BUSINESS CONGRESS 291 

in the packing houses to work, and before they had that they used 
to kill two or three people a week, but since they put it there we 
have no accidents." 

I asked him: "Did your capital build it?" "No," he stated. 
"Boston capital built it." 

I said: "I understand you are going to have a new station 
here, and are going to spend seven or eight million dollars in its 
erection. Who is going to build it?" He answered: "The rail- 
roads." I asked him what railroads. Mr. Harriman was then 
living and he answered : "I suppose Harriman and his associates." 
I asked him what that was going to do for his city, and he said: 
"Why, it is going to make it much more convenient for the people 
going through." I said: "Is Kansas City going to invest a dollar 
in there ?" He said : "No ; the railroads." 

It went on, and I asked : "These tall buildings here ; have they 
all been paid for?" He said: "No. The tall ones maybe have 
plasters on." I asked him if the mortgages were owned in Kansas 
City. He said: "No; in New England mostly." 

Then I said: "What have you here that you own and that 
you put your own money into ?" He answered : "The water works 
is owned locally, and practically everything that contributes to the 
conveniences of Kansas City was furnished by a few people, as 
they call it, representatives of Wall Street." 

They were condemning their benefactors and had no realiza- 
tion of it. I said: "How would you get those men to Texas and 
Mexico to buy your land if it were not for the men whom you have 
been condemning so severely? What makes your city great?" He 
answered: "Why, the railroads, of course." I said: "Your mer- 
chants can stand in their doors and sell goods almost in the very 
doors of the people in New Mexico and Arizona because of the 
network of railroads you have here." I said : "If, by some magic, 
or the same degree of reasonableness with which you have been 
criticising and condemning Wall Street, all of these vast improve- 
ments could be taken away from you, and you woke in the morn- 
•ing and found Kansas City minus those improvements, you, and 
everyone like you, would get down on your knees and pray the 
Lord to restore the city to its former state of development." I 
said : "It is just such indiscriminate criticism that is creating these 
national problems." 



292 NATIONAL BUSINESS CONGRESS 

That distorted condition of affairs is what is bringing you here, 
gentlemen. People criticise without any knowledge, criticising their 
benefactors in reality, and so long as we as business men go on and 
submit to this making of public sentiment, which has nothing of 
conservatism, nothing of fairness and nothing of justice in it, just 
so long will we find things awry. 

Gentlemen, I have departed from my subject, and I must not 
take very much more of your time. I want to add that the adop- 
tion in this country by the National Reserve Association of this 
plan will, in my opinion, provide the machinery for creating the 
credit in this country necessary to enable every man, under normal 
conditions, if he is responsible, to secure the credit necessary for 
the conduct of his business, and I believe, furthermore, that the 
restrictions thrown around it will prevent over-expansion. 

Some people say that you are going to establish an institution 
that will extend credit ad infinitum. There is no intention of that 
kind. Then we hear criticism upon the theory that it is going to 
centralize the money power. I think I can make it plain to you 
where the money power lies to-day ; I believe you already know, if 
you will stop and consider carefully, and I believe anyone within 
the sound of my voice realizes that at this time the money power is 
in the hands of at least half a dozen men. We have reserve centers 
carrying the reserves to-day, and the banks all over the country are 
dependent upon those reserve centers. 

The institution of which I am President carries the reserves 
of a greater number of banks than any other institution in Amer- 
ica. Our clients are located in every State in the Union, and, gen- 
tlemen, in the last analysis the ability of those people to secure 
money, if they depend upon me, and if they stay with me and are 
unable to go elsewhere, depends upon what ? First, upon my ability 
to get money and furnish it to them, and, secondly, upon whether 
or not I have an inclination to meet their wishes. 

In normal conditions, of course, when money is easy, they can 
get money from me and from my neighbor. But I am talking, 
gentlemen, about times when everybody has a demand for money, 
and when the banks by reason of the peculiar requirements of re- 
serve are unable to extend credit in proportion to the reasonable 
business requirements. 

In the thirty-one years of my banking experience, I have seen 
many a time when I have found it impossible to meet the require- 



NATIONAL BUSINESS CONGRESS 293 

ments, and the legitimate requirements too, of the people of the 
community who made application to me for money, and still con- 
fine myself to the requirements of the law, so far as the mainte- 
nance of reserve is concerned. The result is that in times of pres- 
sure we must disregard the law or we must discontinue to extend 
credit, thereby creating chaos and disorder in business and some- 
times bringing on panics, as was the case in 1907. I say we must, 
if we serve the community, make law-breakers of ourselves to the 
extent of encroaching upon our reserves. You can do that to a 
certain point, but in times like 1907, 1893 and 1873 and periods like 
those, when the demand is altogether out of proportion to the 
ability of the banks to meet it, there is only one alternative, and that 
is to decline credit ; and you are the very type of men who, through 
your fear and your loss of confidence, when declined credit, create 
panics. 

When men with good collateral are not able to go to their banks 
and secure credit, they think something peculiar has happened, and 
it has; but is it not also peculiar that when those very men are 
denied such credit they do not seem to have a proper measure of ap- 
preciation of the necessity for a change in or a modification of the 
currency laws which denies them that credit ? 

During these recurring seasons, when there is an immense de- 
mand for money for crop-moving purposes, etc., the people ask: 
"Why don't the banks carry a reserve sufficient to meet these de- 
mands?" A gentleman made that very remark to me a short time 
ago, and I said : "Very well, I will accept your suggestion and, as a 
basis for preparation for that, since we are extending to you a line 
of $300,000 of credit, you will have to get along with $150,000." 
He retorted : "My dear Sir, I need all the money I am now using. 
I can not pay down 50 per cent of my loan and still do business;" 
and that is the situation as applied to each individual. 

One reason for the indifference of the average business man 
to this kind of currency legislation, is due to the fact that if he is 
good he has had such good treatment from his banker that he does 
not appreciate the impending danger. But we all have a very vivid 
recollection of 1907, and what happened. We all know what 1907 
was ; we know how we handled the situation. We repudiated pay- 
ments ; everybody did. It was not applied to the banks alone, but to 
everybody practically. It was the safeguard to the whole situation. 
Two years following, 1909, money was the cheapest throughout the 



294 NATIONAL BUSINESS CONGRESS 

year in Chicago that it has been during the fifteen years of my resi- 
dence in this city. In the fall of 1909, rather in midsummer of 
1909, money was cheaper than it had ever been known to be in the 
city of Chicago. The banks having a large number of correspond- 
ents had prepared themselves, as they believed, admirably for any 
condition that might prevail through an increasing demand for 
money in that fall. They had invested largely in commercial paper 
on the theory that as that was paid, they would have means to meet 
declining deposit, and in the end have money enough to loan to their 
own customers to meet their requirements, but they overlooked one 
little thing. In the fall of 1909, we had a severe snow storm, and 
you business men will recall that we had a blockade here for nearly 
three months, so that the preparation during nine months of the 
year for the activity for fall or crop moving business was cast 
aside and amounted to naught. I want to say here and now, be- 
cause you did not know anything about it before, that the fall of 
1907 was not a circumstance to what the fall of 1909 was. The 
result was that the banks in every large center in the country, acting 
as reserve for any number of banks, if they served their customers 
to keep the progress of business open, had to impair their reserves. 

You say why did they do it ? Simply because a failure to have 
done that would have made it impossible for the farmer to have 
realized credit — I am not talking about cash — for the farmer to 
have realized credit against drafts with bill of lading attached for 
his shipments of products. 

I will cite an incident that occurred in my own business in the 
fall of 1909. We were obliged at that time to extend lines of credit 
to our commission grain men four or five or six times the amount 
to which they were entitled, for the very reason that the people who 
were loading grain in cars, were securing bills of lading for that 
grain and forwarding them to the commission men with drafts for 
75 to 80 per cent of their value. 

The commission men, in the first instance, had to borrow the 
money with which to pay these drafts, and as they were paid the 
credit which they represented was transferred to the country banks, 
in order that their customers might have funds with which to pay 
their bills at the grocery stores, dry goods and hardware stores and 
every other debt of that community. 

Gentlemen, what do you suppose would have happened in the 
fall of 1909 if the banks in Iowa and other sections of the country, 



NATIONAL BUSINESS CONGRESS 295 

in sending in bills of lading with drafts attached for 75% of the 
value of grain could not have gotten credit in Chicago? It would 
have taken no seer to forecast the result. We were, in order to 
avoid impending disaster, compelled to loan the grain men to pay 
those drafts, even to the impairment of our reserves. 

Fortunately, we knew that when the spring sun would come 
it would melt the snow and the grain would move in and the drafts 
would be paid. Fortunately, that situation could not last forever. 

A grain man came to me one day and cited the following illus- 
tration as an evidence of the necessity for his securing credit. He 
said : "Ten weeks ago, a bank in Red Oak, Iowa, drew on me for 
a car load of corn, and I borrowed the money from you with which 
to pay for it. Not hearing from the car within a reasonable time, 
I started a tracer after it, and after waiting some little time and not 
having heard from it, I wrote to the shipper and asked him if he 
would not be good enough to trace it from the other end of the line. 
His reply was to the effect that it was not a difficult task to do this, 
as the car sat under the spout just where it was loaded many weeks 
before." 

The credit which we had given to this grain man had, in fact, 
been outstanding for ten weeks, and in the multiplicity of just such 
transactions our reserves had been threatened. It would have been 
impossible for us to have continued this process for six months, as 
we would have been plunged into a panic the like of which the panic 
of 1907 would not have been a circumstance. 

Do you think you are safe in the conduct of your business with 
such facilities to protect the credit of the country? I don't think 
you are. You go to your local bank. If the credits extended there 
are not out of proportion to their reserve they give you credit, but if 
they have loaned to a point where to extend additional credit would 
impair their reserve, they must get help from their correspondent, 
and that help must come from Chicago, New York or St. Louis in 
the last analysis. If the relationship between our reserve and the 
credits which we have extended is proper, we can discount their 
paper and give them credit; if it is not, there is not a place in 
Christendom where they can get credit, for we are as helpless as 
new born babes to relieve the situation in your community if we 
are compelled to depend upon our present currency system for it. 

I contend we are sitting over a mine, as it were, all the time. 
We have spread and grown and improved in every direction. We 



296 NATIONAL BUSINESS CONGRESS 

have raised this year from the soil, perhaps $9,000,000,000 worth of 
products, and yet we have no business. We are all complaining 
today about slow business, the depression of business. It is due, 
in part, to an inadequate currency system on the one hand and, in 
part, to an agitation of politics, and to a criticism by one man of his 
neighbor without knowing very often what he is criticising. We 
have grown so in the habit of throwing bricks at our neighbors that 
we are retrogressionists. I contend that the most important ques- 
tion before the country is the currency question, and I believe that 
those who attend these conferences can do no more notable work 
or work that will redound to their credit more, Gentlemen, than 
to go home and exercise their energies to disseminate information 
regarding currency legislation. (Applause.) 

I do not ask you all to agree with me, but to study the subject, 
and I am confident in the belief that you will come to the conclusion 
that the bill as presented is perhaps as nearly a perfect bill as we 
can get. 

As I said before, it does not embody all the things that I would 
like to see in it, but I believe if it is adopted, it will give us an insti- 
tution through which we can protect our credit to the extent of being 
able to extend credit, in times of pressure, in amounts necessary to 
meet the reasonable requirements of business. I believe it is as 
nearly safeguarded against over-expansion as is possible. I think the 
question of control is safeguarded, that there is not much danger of 
its falling into the hands of individuals and being used improperly. 

I believe the money power now lies in the hands of a dozen men. 
I plead guilty to being one, in the last analysis, of those men. It is 
a responsibility that I do not want to continue, because I have no 
outlet; I have no place to which I can turn in time of need to dis- 
count the paper which your banks must at times send to me. There- 
fore, I am doing all I can to encourage the people of this country to 
co-operate with us and to enact a law which will protect our credits 
and foster our prosperity. 

There has been a great deal said about centralization of power. 
I contend that this institution would cause a de-centralization of 
power. I believe that two or three in New York, two or three in 
Chicago and two or three in St. Louis could control the question of 
whether or not loans should be made to correspondents throughout 
the country. If you will stop and think a moment, you will realize, 
and I am sure you will agree with me, that reserve is not the power 



NATIONAL BUSINESS CONGRESS 297 

that transacts business. The transaction of business is based upon 
credit; it is the vital force of all business transactions. What is 
reserve? Money which it is proposed to lay in the vaults of the 
association and will not be disseminated for use. If a man would 
carry a tin pail of gold to your office in some transaction, you would 
think he had been dead for twenty-five years and ought to be buried. 

That reserve is lawful money of the country which the banks 
of the country are expected to carry in their vaults and for what? 
For protection against credits with that institution. What does that 
enable us to do? If you increase the amount of reserve in that 
Association, you increase the credit which it can extend. And what 
do you do with that credit? Do you leave it in my hands, or in 
the hands of two or three associations in the country? No, sir; 
you put it in the hands of five thousand banks scattered through this 
country, and in the last analysis you get the dissemination of that 
credit, not to any body of people in the reserve cities as is now the 
case, but back into the hands of the local bankers, the man who 
knows you in your respective home better than I could know you. 
And the man will be able, if this bill is adopted, to and can give you 
credit against your reasonable needs, provided you can convince him 
you are solvent and entitled to it. 

The plan is that discounts may be made by any bank joining 
the Association, and twenty-five thousand can join it if they will — 
perhaps not so many because of the capital restrictions which would 
prevent that — but the majority of the incorporated banks can join 
the Association, and they will have a right to discount paper to an 
amount equal to their capital stock. So that if this becomes a law, 
in the future a bank in your community, in which you deal, will not 
be compelled to come to Chicago to see if it can get due credit, but it 
can go to the one of the fifteen branches nearest it and discount your 
paper to an amount equal to its capital stock. 

If that is not de-centralization of the money power, I don't 
know what it is. Do you suppose I would be here advocating the 
adoption of a bill that would centralize it? Not by any means. 
And I want to say that if the bill would give to me, myself, that 
power, I would be the last man in America to want to assume that 
responsibility. In all these matters we must have a broader con- 
ception of our duty to our citizenship. We should remember that 
in proportion as other sections of the country prosper, just in that 



298 NATIONAL BUSINESS CONGRESS 



proportion you are likely to prosper in your own city and com- 
munity. 

I say the bill that has been presented for your consideration is 
so constructed, I believe, as to provide against these threatened de- 
pressions in money and credit. I am not so foolish as to believe that 
any legislation can prevent panics. Just as a violation of the physi- 
cal laws brings its punishment, just in the same measure an infrac- 
tion of the economic law must always bring distress. If the people 
lose their heads and infract the law of economics, they will have to 
pay the penalty, and no law under Christendom can stop it. But I 
do believe the adoption of this law would create in this country, an 
institution with supervising powers that would, in the main, prevent 
those seasons of customary depressions, and, in the main, prevent 
panics; or, if panics should overtake us, we can at least prevent 
the seriousness with which they have affected the business world in 
the past. 

I have heard, within a day or two, one criticism of the bill, 
coming from State banks. One gentleman, and in fact several gen- 
tlemen, have made the assertion that State banks and Trust com- 
panies are being discriminated against. I contend they are not. 
Under this bill, if it is adopted, it will be impossible for collateral 
securities to be used — and I apologize to my New York friends every 
time I make this statement, because I say that if a bill is properly 
formed it will be right to an extent where it will not make any 
difference what kind of security is used, so long as it is good, nor 
from what source it emanates — but this prohibition was incorporated 
only because the criticism of Wall Street has been so great that it 
was thought best to prevent its securities from being accepted as 
collateral ; it has been so severely criticised that it was thought best 
to pay heed to a prejudice so widespread, but I have no patience 
with the man who claims that the bill discriminates against him for 
the reason that since the Association will not accept collateral 
securities for discount, he will not get any benefit from it. I say 
to that banker, let him take the responsibility of helping to carry the 
commercial risks of the community and he can discount his paper. 

I have an inquiry from Mr. Jones, who asks: "Will you 
explain how the Aldrich plan discriminates against Wall Street 
speculations, and to provide for loans to stock speculators ?" 

Mr. Jones : I wanted to know, if you would, how the Aldrich 
plans discriminate against Wall Street men. It seems to be thought 



NATIONAL BUSINESS CONGRESS 299 

to be in our favor, and if you will explain how it is against us, I 
will be obliged. 

Mr. Reynolds : I think I might answer that very tersely and 
not very elegantly by saying that Wall Street could not have a 
look-in as the bill stands now. 

Mr. Jones: We are discriminated against? 

Mr. Reynolds: You are discriminated against. And I want 
to say, in this connection, and I say it with pride, that when that 
part of the bill was prepared, it was done so at the urgent request 
of three of the largest bankers of the City of New York. They 
said: "We recognize that no bill can be passed that will give us 
that right." They said : "It discriminates against us" — I wish I 
could tell you their names — they said: "We want to say to you 
here and now, you have built all the fences round Wall Street that 
you can; we have had no business for the last three or four years, 
or at least only general, and we have learned from experience that 
we would much better have prosperity throughout the country gener- 
ally, as it will mean dollars to us through the general prosperity to 
where it means cents through special privilege. Does that answer 
your question? 

Mr. Jones : I just wanted these gentlemen to understand that 
Wall Street does not get a look in, as you say. They can go and 
discount paper for a man in Red Oak, Iowa, but they can not dis- 
count a dollar for a man trading in stocks. 

Mr. Reynolds : That is the suggestion that came from those 
men. I think you will agree with me that there is a vast difference 
between loaning money on collateral and loaning on the responsi- 
bility of the merchants and manufacturers of the town. One is 
investment banking and the other is commercial banking; and this 
whole plan has been devised to provide for the automatic ebb and 
flow of business. 

I find I have spoken much longer than I wanted to. I cannot 
refrain, however, from taking just a minute more, with your per- 
mission, to say this : That, to my mind, the problems which are 
confronting us today, are problems which should be settled by the 
business men of this country and not by the fanatics and cranks. 
(Applause.) 



300 NATIONAL BUSINESS CONGRESS 

I want to say, also, here and now, that I believe every man who 
controls a large aggregation of capital, the business of which belongs 
to the public, owes a duty to the public in the handling of that 
money ; and I want to say to you that I believe that every man who 
recognizes that duty and does what he can to discharge that duty 
and his own duty to the public, has a right to ask the public to pro- 
tect that capital. We must exercise a more discriminate influence 
in all these matters. In recent years we have been so engrossed in 
our own affairs, that we have ignored the fact that what has been 
done in Washington might be of consequence to us. We are 
awakened finally to a realization of the fact that it makes a won- 
derful difference what goes on there and we are very much dis- 
turbed as to what is going to happen at Washington. Just what 
will happen there will be that which you Gentlemen permit to hap- 
pen ; just in proportion as you and I and other persons discharge our 
duty to the obligations devolving upon us, just in proportion as we 
do our duty to the public, just in that proportion have we the right 
to ask the public to co-operate with us to correct those things. I 
contend that this can only be done through going back, in the last 
analysis, to the people ; it can only be done through creating a proper, 
sane and conservative public sentiment. The great trouble is there 
has been no discrimination. In one respect, a discrimination against 
aggregations of capital, but in other respects none. 

I want to appeal to you people as business men, I want to 
appeal to you in the interests of your own individual business and 
the interest of your own communities and your own common- 
wealths, and in the interest of the Nation, which we all so much 
love; I want to appeal to you in the interest of better business; I 
want to appeal to you in the interest of better manhood ; I want to 
appeal to you along the lines of higher principles in business; I 
want to appeal to you along the lines of higher ideals in personal 
relationship of managers of capital to the public to do what you can 
to help create a public sentiment which will not only settle the cur- 
rency question along lines that will be right and fair, but which will 
settle all these questions which are engaging your attention at this 
time. 

I thank you, and apologize for taking so much of your time. 
(Continued applause.) 

The Toastmaster: We have had two very interesting ad- 
dresses on the subject of how to get a Merchant Marine. One of 



NATIONAL BUSINESS CONGRESS 301 

those addresses was by Mr. Rosenthal, one of the prominent Chicago 
business men, the other by Professor Johnson of the University of 
Pennsylvania. I think I am safe in saying that they are diametri- 
cally opposite. We have another address to be delivered on "How- 
to Get a Merchant Marine." I have no idea what his views on the 
subject are, but I take great pleasure in introducing to you Mr. 
James L. Ewell. (Applause.) 



THE RESTORATION OF OUR COMMERCIAL 
FLAG TO THE HIGH SEAS. 



Address by Mr. James L. Ewell, 

Secretary of the National Merchant Marine Association. 



Mr. Ewell: Mr. President and Gentlemen of the National 
Business Congress — It is hardly necessary for me to emphasize the 
fact that I appreciate the honor of an invitation to come out here 
and address you, but I do esteem it a great privilege to be able to 
place before such a distinguished body of business men another 
phase of what I consider a question, perhaps as great, if not greater, 
than the question that has been discussed by Mr. Reynolds, the 
gentleman who preceded me. 

I want to say, too, that I share with my colleagues here, in the 
pleasure of the splendid entertainment that has been afforded us 
here, and last night we had an opportunity to see that Chicago was 
giving New York a hard chase in Grand Opera, which I enjoyed 
very much. 

OUR OVER-SEA TRADE THE CORNERSTONE OF OUR 
FUTURE PROSPERITY. 

This land of the starry flag is known among the nations of the 
earth as "The Great Republic." We are great in population. 
Figures of the present census will surely show the population in ex- 
cess of 90,000,000. We are great in our vast expanses of territorial 
area; great, likewise, in the varied products of soil and mine and 
mill. According to conservative estimates, we produced last year 
from soil and mine and mill, products to the value of not less than 
$27,000,000,000. Of this production, we sent abroad a total of 
$1,728,668,000 in value. Only one nation sends abroad to foreign 



302 NATIONAL BUSINESS CONGRESS 



markets a greater total than we export. Four nations of the earth 
sell to others, more than $1,000,000,000 worth of their production. 
These four, with their respective totals, are: 

United Kingdom 1,835,739,000 

United States 1,728,668,000 

Germany 1,607,253,000 

France 1,017,487,000 

Of the vast total that we export, about $600,000,000 represents 
the value of raw unmanufactured articles, such as cotton and grain 
— the balance is of articles that we have manufactured. The manu- 
factured products include foodstuffs, such as flour and prepared 
meats and other manufactured articles such as machinery -and the 
like. With the constant growth of our population, our exports of 
foodstuffs are continually shrinking. On the other hand, we send 
abroad increasing quantities of other manufactured articles like 
machinery. 

If our prosperity is to continue, we must develop increasingly, 
our foreign trade. The reason for this is not far to seek. If the 
vast exports of the past year had been thrown, for any reason, upon 
the home markets, the result would have been a glut, with the con- 
sequent failure of our commercial classes and vast unemployment of 
our workers in every line of activity. 

In our manufactured products we are able, in many lines, to 
produce as much in eight months as the home markets will take in 
twelve. It will be possible to keep our mills open and active only 
as we find a market for the full product of same. This is why our 
continued prosperity depends upon the development of our export 
trade, particularly in manufactured articles. 

OUR OWN SHIPPING A NECESSITY TO THE MAINTENANCE 
OF OUR EXPORT TRADE. 

If we are to safely hold our export trade, and still more, if we 
are to develop new markets in other countries, we must have our 
own means of delivery. It is well-known that no store trusts to a 
rival concern for its delivery service. Our exports are almost 
wholly delivered in ships. If we are to make these deliveries in the 
face of the trade rivalry of other nations, we must control the ships 
by which we send our products abroad. Other nations see very 
clearly the necessity of maintaining a merchant navy if a foreign 
trade is to be secured and maintained. 



NATIONAL BUSINESS CONGRESS 303 

The way in which a nation's export trade is vitally connected 
with its merchant marine may appear from one or two illustrative 
examples. A few years ago, in fact until 1907, we had, plying be- 
tween San Francisco and Australasia, three American ships known 
as the Oceanic Line. They made regular sailings from San Fran- 
cisco every three weeks as mail and passenger and cargo steamers. 
The last year these boats were in operation, before being driven 
from the field by subsidized Canadian and Japanese competition, 
they carried from the port of San Francisco to Australasia $28,000,- 
000 worth of products. Last year, in the absence of any line from 
San Francisco to Australasia, depending exclusively upon tramp 
steamship service, our exports from San Francisco shrank to a 
total value of only $2,000,000. Formerly we had an extensive mar- 
ket in South Africa. This market has been seriously impaired be- 
cause a line of mail steamers, subsidized by Canada, and plying be- 
tween Montreal and South African ports, has, by reason of govern- 
ment backing, been able to cut on New York rates to such an ex- 
tent as to divert a large amount of trade from the United States to 
Canada. Freight of a given class, which pays $6.70 per ton from 
New York to Cape Town, is taken from Montreal to the same port 
at a charge of $4.26. It is not necessary to give other instances, 
though many might be adduced. 

There is still another reason why it is necessary for us to have 
our own ships if we are to be secure in maintaining our export 
trade. A nation lacking its own merchant marine, depends for its 
facilities for delivering its foreign trade on the exigencies of inter- 
national politics. Were England and Germany, for example, to 
engage in war with one another, those powers, in the prosecution of 
such a war, would withdraw from their merchant navies a very con- 
siderable proportion of the tonnage which they own. In the recent 
Boer war, although the South African republics possessed neither 
battleship, privateer nor merchantman, England, in the prosecution 
of that war, and incident to the forwarding and supplying of her 
troops, withdrew from her merchant marine a tonnage of, approxi- 
mately, one million ; 262,000 tons of shipping were withdrawn from 
the lines running between Great Britain and Boston. The natural 
result of the withdrawal of this large amount of shipping from over- 
sea trade, was a sharp rise in freight rates, amounting in many 
instances, to 30% and over. This was, as one can readily see, in- 
jurious to our export trade. In fact, the first year of the Boer war, 



304 NATIONAL BUSINESS CONGRESS 

the shrinkage in our exports and foodstuffs, amounted to $48,000,- 
000 as against the figures of the year preceding, and, in the second 
year, this shrinkage was $67,000,000 as by the same comparison. 
Of course, this shrinkage was largely in values rather than volume, 
and the farmers of the Middle West, receiving less for their prod- 
ucts than they otherwise would have done, helped to pay the cost of 
the Boer war. 

In case of a Titanic conflict, such as that between Great Britain 
and Germany would be, our foreign trade would suffer an almost 
absolute stoppage, with resultant panic and disaster to our other 
national commercial interests, for England and Germany together 
carry a total of 80% of our export trade, and in case of war it would 
be necessary for them to at once sacrifice this business at our own 
great cost. 

During the Napoleonic wars, when almost all of Europe was 
embroiled, as a result of the shipping policies pursued by our 
fathers, we had developed a vast merchant navy of our own, and 
not only was our foreign trade secure, notwithstanding the violent 
conflagration raging over nearly all of Europe, but as the most 
important neutral carrier, the conflict actually proved to our com- 
mercial advantage. 

THE SITUATION THAT CONFRONTS US. 

"It is not a theory" as one has put it. "But a situation that con- 
fronts us," and my purpose today is to open your eyes to the real 
gravity of the outlook. During the past one hundred years, since 
1810, our foreign trade has increased fifteen-fold. At the first date, 
we carried 91.5% of our foreign trade in our own bottoms. We 
had an over-sea tonnage at that time of 981,019; today, after the 
lapse of one hundred years, we carry about 8% of our foreign trade 
in American ships and our tonnage is less in amount, by more than 
100,000 tons, than it was a century ago; and this does not tell the 
whole story, for only a small percentage of our present registered 
tonnage is modern and engaged in actual service. 

Admiral Robley D. Evans states that the most remarkable thing 
observed in connection with his voyage while in command of the 
fleet, was the absence of our flag from the great ports of the world 
visited by that fleet. 

An English naval officer last season was riding along the water- 
front of Liverpool in an electric train, when, looking out of the 



NATIONAL BUSINESS CONGRESS 305 

window, he saw fluttering from the peak of a vessel in the harbor, 
our national banner. The sight was so novel that at the next station 
he left the train and walked back one-half mile to make an investi- 
gation. Asking the harbor master how often he docked vessels 
flying that flag, he was answered that although he had been harbor 
master for twelve years, this ship, a square rigged vessel, was the 
first flying the American flag which he had ever assigned to a harbor 
berth. 

Prof. John C. Freeman, of the University of Wisconsin, on a 
recent visit to Copenhagen, the greatest port of the Baltic, inquired 
of the port authorities how often American vessels were seen in 
those waters. In answer he was told that the last American mer- 
chant ship to visit Copenhagen, was some eighteen years since, dur- 
ing the administration of Grover Cleveland. 

One more instance will illustrate, perhaps, more fully than any 
other, our shameful condition. When, a few years ago, the Palma 
administration collapsed in Cuba, it became necessary for this gov- 
ernment to send to the island a few thousand troops for the purpose 
of restoring order. We sent our "Boys in Blue," not upon ships 
flying our own flag, but perforce upon vessels flying the meteor 
flag of Great Britain. 

HISTORY. 

Patrick Henry once remarked: "I know of no way of judging 
of the future, but by the past." In other words, "Hind-sight is 
better than foresight." Let us look back a little and see what we 
may learn from our maritime experience in the past, and judge to 
what extent we may be guided thereby in our plans for the future. 

A PERIOD OF DISCRIMINATING DUTIES AND TONNAGE 

TAXES. 

When the Washington administration came into power on 
March 4, 1789, a situation very similar to that now existing, con- 
fronted our people. Our total over-sea tonnage amounted to but 
123,893, and of our foreign trade 77 A% was carried in the ships of 
other powers. One of the first concerns of the new administration 
was to remedy this intolerable situation. Upon the meeting of the 
first Congress, a petition was presented from the merchants and 
ship owners of Baltimore, running in part as follows: "Your peti- 
tioners, on whichever side they may turn their eyes, see reason to 
believe that the United States may soon become as powerful in ship- 



306 NATIONAL BUSINESS CONGRESS 



ping as any nation in the world. * * * Permit us to add that 
for want of national protection and encouragement, our shipping, 
that great source of strength and riches, has fallen into decay and 
involved thousands in the utmost distress." 

In response to this and similar appeals, on July 4, 1789, the first 
Independence Day of the new nation, Congress enacted a law impos- 
ing discriminating duties and discriminating tonnage taxes in the 
interest of the protection and promotion of our own merchant 
marine. The discriminating duties ranged from 10% and upwards 
in favor of imports carried in American ships. The discriminating 
tonnage tax made all foreign vessels pay a tax of 50c per ton gross 
on each entry, while American vessels paid a tonnage tax of 6c per 
annum. 

The result of this, and other similar measures, may be seen from 
the public records. I will only say that by the year 1800, eleven 
years after the enactment of this measure, our foreign tonnage had 
increased more than five-fold, totaling 667,107, and the proportion 
of foreign trade carried in our own vessels had grown to 89%. Ten 
years later, our foreign tonnage had increased to 981,019, and we 
were carrying in our own ships 91.5% of our foreign trade. The 
wisdom of this early policy thus was amply evident. However, 
shortly after this the War of 1812 came on. In 1815, at the con- 
clusion of this conflict, we abandoned our discriminatory policy, 
and beginning first with Great Britain and later with the other 
powers, we entered into reciprocal arrangements under which we 
agreed not to impose either discriminating duties or tonnage taxes 
upon the ships of other nations. 

What was the result of this abandonment of our early policy? 
The figures tell the tale. In 1820 our over-sea tonnage had declined 
to a total of 583,657, and by the close of another decade, by 1830, 
the total was only 537,563. After this American enterprise began to 
make itself felt in spite of the lack of adequate government assist- 
ance, and by 1840 our over-sea tonnage showed a total of 762,838. 
By 1845 we had nearly regained the figures of 1810, the total ton- 
nage then amounting to 904,476. 

THE GREAT PERIOD OF AMERICAN MARITIME EXPANSION. 

In the decade between 1845 and 1855, we witness the greatest 
growth that our merchant navy has ever known. In that single dec- 
ade our merchant tonnage engaged in over-sea traffic increased 



NATIONAL BUSINESS CONGRESS 307 

nearly three-fold, or from a total of 904,476 in 1845, to 2,348,358 in 
1855. This is of itself a long story and we can sketch in only a few 
items of the total. 

In the later thirties, American ingenuity, enterprise and skill 
had produced sailing vessels which were showing a "clean pair of 
heels" to anything that British dock yards could launch. The result 
was that our ocean carriers were securing the cream of the over-sea 
carrying trade. We had been the pioneers in steam construction, 
the first steamboat having been launched, as we all know, in Ameri- 
can waters. In 1838 our coastwise steam tonnage was nearly three 
times as extensive as that of Great Britain. But at that time, Great 
Britain, seeing that she was distanced in the sailing competition, re- 
sorted to steam and began her policy of subsidizing ocean mail 
steamers, under which she has since expended more than $300,000,- 
000 and which has resulted in giving her some thirty lines of great 
mail steamers, which run from England to every quarter of the 
globe. 

In 1839 England engaged with Samuel Cunard and his asso- 
ciates to pay toward the maintenance of the steamers known as The 
Cunard Line, a subsidy of $425,000 annually. This was about 25% 
of the estimated running cost and the amount which was deemed 
necessary in order to put these steamers on the same financial basis 
as sailing vessels. Our seamen at first laughed at the lumbering 
steamers, and in fact in many cases, our crack sailing craft could 
outrun them. The Palestine, of the Morgan Line, to London on 
one occasion landed her passengers at Portsmouth in fourteen days 
from New York, squarely beating the Cunard steamer, sailing at the 
same time, and on her first homeward voyage from Liverpool to 
New York, the Dreadnaught, clipper ship, reached Sandy Hook 
just as the Cunard steamer Canada, which had started one day 
ahead of her, reached Boston. But the steamer had come to stay 
and by 1845 it became apparent to our shipping interests, and even 
to our national government, that if we were to maintain our place 
in over-sea commerce, we must follow England's lead and subsidize 
steamship lines. The only trouble was that we were about five 
years too late. 

In the year mentioned, we passed an Ocean Mail bill, known as 
The Tyler Act. It was not a party measure, but was non-partisan 
in its character. Among its advocates were such men as the Demo- 
cratic Senator Thomas Butler King, of Georgia, who said in advo- 



308 NATIONAL BUSINESS CONGRESS 

cacy of this measure: "It is sufficient to show that they (British 
statesmen) are resolved, as far as practicable, to monopolize the 
intercourse between these two important points. This movement 
shows clearly that the time has arrived when we must decide 
whether we will yield this essential branch of navigation, or 
whether we shall promptly extend to our enterprising merchants, the 
necessary means to enable them to bring American energy, enter- 
prise and skill to the successful competition with British sagacity 
and capital." 

Two years later, in advocating the strengthening of this same 
measure, President Polk, in his annual message to Congress, said : 
"The enlightened policy by which a rapid communication with the 
various distant parts of the world is established by means of Ameri- 
can built steamers, would find an ample reward in the increase of 
our commerce and in making our country and its resources more 
favorably known abroad. But the national advantage is still greater 
— by having our naval officers made familiar with steam navigation 
and of having the privilege of taking ships already equipped for im- 
mediate service, at a moment's notice, and will be cheaply furnished 
by the compensation to be made by the transportation of the mail 
over and above the postage received." 

As a result of this policy of subsidies, our steamship lines multi- 
plied upon every over-sea route. Perhaps the most notable develop- 
ment was that of the Collins Line between New York and Liver- 
pool. The vessels of this line speedily distanced everything that the 
English had afloat. Not only did they gain all the records, but they 
forced trans-Atlantic freights down from $35 a ton to $20 a ton. 
The last and greatest of these steamers, the Adriatic, held all speed 
records long after the abandonment of our enlightened policy had 
driven this and other lines into liquidation, and had led to this ves- 
sel's transfer under the English flag. 

These boats of the Collins Line received, substantially the same 
compensation received by the Cunard Line, although they averaged 
practically two days less in crossing the Atlantic than did the latter, 
and thus not only furnished better service, but added to our com- 
mercial and national prestige. The Cunard Company, appealing to 
the British government for more assistance, had its subsidy ad- 
vanced to $856,871 per annum. We followed suit, and in 1852 in- 
creased the Collins subsidy to $850,000 annually. Great Britain 
then desisted, seeing that we were willing to match her payments. 



NATIONAL BUSINESS CONGRESS 309 



Had we resolutely pursued this policy down to date, without any 
question, instead of Britannia ruling the wave as she does at the 
present time, Columbia would be empress of the waters. 

The wise men of that time saw the value of a policy of generous 
steamship subsidies. Senator Bayard of Delaware, in debating the 
proposed addition to the Collins Line subsidy, said: "I am willing 
to trust American skill and industry in competition with any people 
on the globe when they stand nation to nation, without government 
interference, but if the treasury of a foreign nation is poured into 
the lap of individuals for the purpose of destroying the interests of 
my country, or for building up a commercial marine at the expense 
of the commerce and prosperity of the United States, I, for one, 
will count no cost in countervailing such governmental action on 
the part of Great Britain, or any foreign power." 

Senator Shields of Illinois declared that "It was impossible for 
American private enterprise to succeed against private British enter- 
prise backed by the money and energy of the British government." 

However, about this time the War of the Sections was drawing 
on and the question of subsidizing our merchant marine became a 
partisan issue. The result was the final abandonment of the policy 
which, in ten years, had wrought such marvelous results, and the 
cessation of the growth of our merchant navy, for, in the five years 
elapsing between 1855 and 1860, we added to our marine tonnage 
scarcely an increase of 30,000 tons. 

During the Civil War and as a result of the same, we lost ap- 
proximately 1,000,000 tons of shipping, 200,000 of which were 
destroyed by the Anglo-Confederate cruisers and the balance of 
which were passed by sale under the flags of other nations. 

Had we, after the war, resumed the policy which we had aban- 
doned ten years previously, even then it would not have been too 
late for us to regain our lost glory. Nothing, however, has been 
done since -that time, save occasionally, as in 1891, in a half-hearted 
and faltering way. The result has been the continued decline of our 
merchant marine from 1855 practically until the present year of 
grace, fifty-five years later. 

PATRIOTIC CONSIDERATIONS. 

But this is not simply a matter of commerce and of dollars and 
cents — it is a matter of the gravest national concern, and calculated 
to profoundly move either party. Our lack of an adequate mer- 



310 NATIONAL BUSINESS CONGRESS 

chant marine leaves us practically helpless and defenseless against 
an aggressive and vigorous foreign foe. We boast of our mighty 
navy, but the Naval Board will tell you that, through lack of a mer- 
chant marine to supply the necessary colliers and auxiliaries, it could 
not, on a sudden call, develop 10% of its rated efficiency. 

How helpless we are was shown at the time President Roose- 
velt sent our fleet around the world. Napoleon used to say that 
"an army fights on its belly." In other words, that without an ade- 
quate Commissary Department, the best military force would 
speedily fade away and disappear. It is equally true that a battle 
fleet sails and fights upon its coal bunkers; but when we came to 
send our fleet around the world, it was necessary to charter twenty- 
seven colliers to convey the coal for these bunkers. Lacking vessels 
of our own, we were compelled to go afield and hire vessels belong- 
ing to other nations. Had a solitary shot been fired during the prog- 
ress of this armada around the globe, under international law every 
one of those colliers would have been obliged to sail away and desert 
our fleet, possibly in mid-Pacific, leaving those mighty vessels to 
their fate, derelicts, as helpless as "painted ships upon a painted 
ocean." 

Japan, as the result of an enlightened and aggressive policy of 
subsidies, has developed within the last ten years, a fleet of no less 
than 206 mighty merchant steamers, not one of which registers a 
tonnage of less than 2,000. What this means to us may be gathered 
from the recent remarks of Major-General J. P. Story, U. S. A., 
who writes: "Japan has now supremacy in the Pacific. In the 
event of war, that supremacy could not be challenged until we had 
constructed a sufficient fleet of colliers. Japan can, within three 
months, land on the Pacific coast 400,000 troops and seize, with only 
insignificant resistance, Seattle, Portland, San Francisco and Los 
Angeles. A barrier of mountains and deserts makes the defense 
of the Pacific slope an easy matter against an attack from the East, 
and only from that direction could the United States hope to recap- 
ture its lost territory." : 

Why was it that Mr. Roosevelt, who is not fond of "eating 
humble pie," readily partook of a diet of that description at the invi- 
tation of the Mikado in the matter of the San Francisco public 
school issue? If you or I went journeying to Tokio, we would find 
that on arriving there we would be assigned to lodgings in the for- 
eign quarter, as all foreigners are under the police regulations of 



NATIONAL BUSINESS CONGRESS 311 



that city and government. But when in San Francisco, the San Fran- 
cisco School Board, on finding that a number of Japanese young 
men desired to learn English, and thinking it better for all concerned 
that, instead of sitting with our boys and girls in the primary grades, 
they should be assigned for instruction to separate schools for 
Asiatics, the Japanese government took umbrage, and under the 
"Most favored nation" clause in the treaty existing between us and 
that nation, demanded that their young men should attend school 
when and where they pleased, regardless of the perfectly proper and 
reasonable regulations made by the School Board of the aforemen- 
tioned city, what was the action of our government in the situation ? 
A perfectly proper course would have been to have told the Mikado 
that if he would mind his own business, as we were perfectly satis- 
fied that he should do, we would attend to our own affairs without 
soliciting his advice. Instead, however, of taking this position. 
President Roosevelt, finding on inquiry from the Army and Navy 
Departments, that we were in no position to call the Japanese 
"bluff," promptly stepped up to the counter and consumed a dish 
of crow. 

I hardly think that the Japanese would have gone to the extent 
of fighting over the question, but the Mikado had a gun and had the 
drop on our Teddy, and our Teddy, like a wise man, promptly held 
up his hands. But is it flattering to our national pride or in con- 
sonance with our national safety, to allow a situation under which 
we are exposed to insult and offensive aggression? 

PANAMA CANAL. 

At vast expense, totalling, perhaps, in the neighborhood of 
$500,000,000, we are engaged in constructing the Panama Canal, one 
of the wonders of the world. It will make the entire west coast of 
South America accessible to modern enterprise and development. 
The result will be that almost immediately on the opening of the 
Canal, the whole west coast of the continent to our south, will ex- 
perience such a development as the world has probably never known. 
There will be an immense demand for machinery, for every variety 
of manufactured product and of those articles that we can most 
readily and naturally supply ; but the English and Germans own the 
ships, and, unquestionably, those ships will be used to advance their 
own commercial interests and to secure for themselves the lion's 
share of this rich trade. We appear to be engaged in the most tre- 



312 NATIONAL BUSINESS CONGRESS 

mendous altruistic project ever known to man. We seem to be 
building this magnificent work in the interests of our commercial 
enemies and trade rivals. Had we ships to sail through this water- 
way, our Gulf cities in particular, and in a less measure, the rest of 
our land, would experience a marvelous development of industry 
and commercial activity as a result of the trade opportunities on the 
west coast referred to. Lacking an adequate merchant marine, it 
looks as though we would be compelled to keep in the rear and be 
satisfied with a few crumbs swept from our competitors' table. 

WHAT SHALL BE THE REMEDY? SHALL WE TRY 
DISCRIMINATION? 

There are those who suggest returning to the policy of our 
fathers and imposing discriminating duties on imports in foreign 
bottoms and discriminating tonnage taxes against foreign ships. 
Now, while we are aware that this policy worked marvelously 
during the first twenty years of this government, we are equally 
sure that it is a policy that could not be applied in the present exi- 
gency. We have displomatic engagements with a score and more of 
the other nations of the world, which would prevent this discrimina- 
tion, unless we first abrogated these arrangements. Some have sug- 
gested that this be done, alleging that in order to secure an omelet, 
it is necessary to break a few eggs. Discriminations, however, are 
of more than doubtful value. France, in 1872, tried this policy of 
discrimination. President Grant of this country, promptly issued 
a proclamation of retaliation in which he was joined by practically 
all the powers of the world. The result was that after a year's 
experience, France abandoned the policy of discrimination as im- 
practicable.. 

A similar policy engaged in by the United States, would, at 
once, provoke world-wide retaliation and we should be worse off 
than we now are. 

SHALL THE REMEDY BE FREE SHIPS? 

We have those, on the other hand, who believe that if we re- 
pealed our Navigation Acts, and admitted to free registry ships 
built by other nations, our own merchant marine would speedily 
be replenished. However, those advocates leave out of sight several 
things. Most of all they leave out the increased cost of operating 
an American owned ship. The buying of cheap ships would not 



NATIONAL BUSINESS CONGRESS 313 

provide us with cheap labor with which to man them. Then still 
further, the ships of other nations, particularly those belonging to 
the most efficient class, almost without exception, are in receipt of 
generous governmental aid. Of the three hundred or more 20-knot 
steamers plying upon the various trade routes of the world, scarcely 
one does not receive a government subvention. If we simply offered 
to allow our merchants to buy ships freely in every market, there 
is not the slightest reason to suppose that any advantage whatever 
would be taken of such an opportunity. In fact, within recent years 
a number of the steamers that we already owned have been trans- 
ferred from our flag to other flags because of the increasing cheap- 
ness of operation resulting therefrom. The steamers of the Red 
Star Line, the Finland, Kroonland and Samland, have only within 
the last year or two been put under the Belgian flag for the reason 
mentioned, although they already enjoyed the doubtful advantage of 
American registry. 

SUBSIDIES. 

We now come to the remedy which is employed extensively by 
almost every nation on earth, save our own — the provision of special 
bounties or subventions for the development of a national merchant 
marine. Some seem to be afraid of the word "subsidy." Allow 
me to quote from Mr. Justice Miller of the Supreme Court, on this 
question. He says : "Bounties granted by a government are never 
pure donations, but are allowed either in consideration of services 
rendered, or to be rendered, objects of interest to be obtained, pro- 
ductions or manufactures to be stimulated, or moral obligations to 
be recognized." In other words, subsidies are granted to subserve 
some public need, or to advance some public interest. The pro- 
posed shipping subsidies are not exclusively in the interests of a 
class, still less in the interests of any individuals of a given class. 
They are in the interests of the peace and prosperity of the entire 
people. 

Our Mr. John D. Long in debating the question of ship subsi- 
dies before the Pittsburg Chamber of Commerce, was answered by 
his opponent, the editor of the Johnstown Democrat, with the state- 
ment that he, the editor in question, was opposed to the principle of 
taking money out of one man's pocket for the benefit of another 
man. Now this sounds very platitudinous and self-evident, but in 
the city where I reside, we have certain avenues where you will 
scarcely find a baby to a block, but where the property is assessed 



314 NATIONAL BUSINESS CONGRESS 



at an extremely high valuation, and the owners, in consequence, pay 
very large sums in taxes. In other sections of this same city we have 
streets where for block succeeding block the inhabitants own scarcely 
anything else but babies and pay no taxes to the city at all. Yet 
we take this money, collected from the men who have no children 
and with perfectly clear consciences, spend it lavishly in building 
school houses and paying teachers for the instruction of the children 
of the parents who pay no taxes. The same principle applies in 
every other field of human government and activity, and the wisdom 
of the subsidy policy is shown by the fact that the leading nations 
of the world are this year paying out in postal bounties, admiralty 
subventions and other forms of shipping subsidy, approximately, 
$50,000,000. Canada to the north of us, is maintaining no less than 
ten lines of ocean mail steamers at a cost to the Dominion of $1,- 
750,000. This is, approximately, 2% of the total revenues of that 
government. If we used the same generosity, we would be expend- 
ing $20,000,000 a year for this purpose. 

I herewith give you the totals of a few of the leading powers, 
showing what they are expending for the upbuilding of their mer- 
chant navies: 

France $13,423,737 

United Kingdom ? 9,689,384 

Japan 5,413,700 

Italy 3,872,917 

Spain 3,150,120 

Austria-Hungary 2,984,530 

Germany 2,301,029 

I am aware that many statements reflecting on a subsidy policy 
have appeared from time to time in the public press. During the 
past winter there were no less than four circulars issued to the 
American public opposing subsidy legislation. They were issued 
anonymously, except in the last instance, and in this last case we 
traced the article in question to the agents of the South American 
shipping pool. These same people in the investigation conducted 
by Congress admitted the existence of a South American Shipping 
Trust and the payment of rebates to their favored patrons. At the 
same time it was admitted by them that their publicity was secured 
through their advertising channels, showing where the money con- 
sideration came in in connection with this whole situation. It is 



NATIONAL BUSINESS CONGRESS 315 

the foreign shipping interests which have systematically sought to 
becloud our American intelligence in this whole matter. 

We would not advocate construction bounties such as are given 
by France, Italy and Japan. These countries have, by such meas- 
ures, wonderfully developed their merchant navies, France in the 
last thirty years having more than doubled her merchant marine; 
Italy increased hers three-fold and over, and Japan, since 1896, 
having practically created a modern merchant navy now aggregating 
nearly 1,500,000 tons. The last named nation will give to a new 
steamer $10 for every ton of her registry, $2.50 for every indicated 
horse power of her machinery. A boat like Tonyo Maru will re- 
ceive, upon completion, a bounty of $210,000. However, we only 
ask that our government do for our citizens what Great Britain, 
Germany, Spain, Norway and other powers are doing for theirs. 
Our people possess enterprise and ability, but they are not com- 
peting against similar enterprise and ability in foreign nations, but 
against the power and resources of foreign governments backing up 
their citizens, and unless we are prepared to get off the map, we 
shall have to take similar measures. I do not believe that the 
American people, once the facts are made clear, will long endure 
the present intolerable state of affairs, and the reason why the 
National Association of Manufacturers is engaged in a nation-wide 
campaign in the interests of the revival of the American merchant 
marine is because we believe that the American people will respond 
to an appeal, based, as ours is, upon business and patriotic consider- 
ations. We do not ask for partisan action, but urge all parties to 
unite in the interests of the public weal and for the honor of our 
common flag in taking such measures as will restore once more our 
banner to the seas. The National Association of Manufacturers 
feels that it can embark upon no nobler or more worthy project 
than advocating at the bar of public opinion this great question, 
and we have every reason to believe, from our experience in every 
section of this country, that the public response will be emphatic 
and that in the near future Congress will be compelled by the voice 
of the people to give us a subsidy measure, which will once more 
allow us to hold up our heads without shame before the nations of 
the world. 

Gentlemen, I thank you for your kindness. (Applause.) 



316 NATIONAL BUSINESS CONGRESS 

The Toastmaster: Gentlemen, our good friend, Mr. Rosen- 
thal, has told us one way by which we can increase the export trade 
of our country. He has still other thoughts on that subject, and 
he will present them to us now. (Applause.) 



HOW TO INCREASE OUR EXPORTS. 

Mr. Benjamin J. Rosenthal: Mr. Chairman and gentle- 
men: The very lateness of the hour brings to my mind a little 
story which, undoubtedly, many of you have heard. It seems that 
a Chinaman had been arrested charged with stealing a dog. He had 
been brought before the court and owing to the fact that he could 
not speak English, an interpreter was employed, and the examina- 
tion finally resolved itself down to a question of the color of the 
dog. One of the counsel said to the interpreter : "Ask the China- 
man what was the color of the dog?" The interpreter asked the 
question and the Chinaman kept talking about fifteen minutes, and 
finally the court became disgusted and turned to the interpreter and 
said: "What did he say was the color of the dog?" The inter- 
preter said: "He was a yellow dog." (Laughter.) And so, gen- 
tlemen, I could say in three words almost what the Chinaman took 
a half hour to say, and could give you the gist of the conversation, 
and, because of the lateness of the hour, I feel almost inclined to 
do it. 

The question is, how to get foreign business, and the answer 
is: "Go after it." But we speakers got our supper for nothing. 
You paid for it, and one of the conditions was that we would have 
to talk for it, and, therefore, I think I feel obligated to the National 
Business Congress, even at the expense of keeping you here to hear 
me talk for my supper ; besides that, they paid my railroad fare here 
tonight. I came from Fifty-third Street on the Illinois Central, 
and I have to talk for that. Therefore, I am going to try to keep 
you here as briefly as possible, but I might also add that I missed 
my train, owing to the lateness of the hour, and I cannot get out 
for half an hour, and am going to make you stay if you will. 

The subject I am to present did not originate with me. It was 
promulgated from the fertile brain of the late Volney W. Foster, 
who was one of the charter members of the National Business 



NATIONAL BUSINESS CONGRESS 317 

League of America, and one of Chicago's most respected and dis- 
tinguished citizens. He passed from this world about seven years 
ago, but while he was alive he discussed the subject of an inter- 
national trade court, as we expressed it, at various times. After 
his death I decided, because I was deeply interested, that I would 
study the subject, although I never felt and do not feel now that 
I could do the subject justice. 

Last year during a visit abroad I made careful investigation 
of the industrial conditions, paying special attention to the foreign 
labor, and comparing it with the labor situation at home. I also 
made a comparison with the organization, system, advertising, en- 
ergy, and everything in connection with the industrial system, as 
well as a study of the needs of the people abroad, so as to ascertain, 
if possible, to what extent we might profitably supply them. I ap- 
preciated at the time that it was a big undertaking, but I endeav- 
ored to cover as much ground as possible, and the result of my 
investigation led me to the conclusion that England and the con- 
tinent are greatly in need of much that we can spare, and that the 
opportunities for doing a large business abroad are practically un- 
bounded. I am satisfied that the reason we are not doing a much 
greater export business is either the lack of confidence in our 
ability to get it, or our indifference, which prevents our going after 
it. We have become so accustomed to swapping dollars amongst 
ourselves, and up to quite recently we have passed through such a 
wonderful commercial expansion in our own country, that we have 
almost, except in a few lines, overlooked the great and profitable 
foreign business. If manufacturers have hesitated to go after the 
foreign business because they have compared the scale of wages 
paid workmen abroad with our own, let me assure them from a 
careful observation that the wage scale is a misnomer and cannot 
be used as a fair basis of computation. I make the broad general 
statement — and I have no fear of honest contradiction — that except 
in the case of a few special lines where expert or special workmen 
are employed in trades, that I might call inherited, the American 
workman at his own wage can produce the same article at a lower 
price than the foreign workman at his. The explanation is simple. 
Our great natural resources, our skilled labor, our boundless energy, 
our superior working conditions, our selling and advertising genius, 
our cost system and our up-to-date machinery — these, with our 
prompt cash basis of trading, make a combination that so far offsets 



318 NATIONAL BUSINESS CONGRESS 



the so-called cheap labor, that I am convinced the statement that 
I make that we can produce almost anything at a lower price than 
it can be produced abroad can be fully borne out. Does any one 
within the sound of my voice believe that men and women with 
emaciated, underfed bodies, working under miserable conditions at 
starvation wages, can concentrate that physical and mental force 
that is required to properly produce results ? This in a large meas- 
ure is the competition the American manufacturer is confronted 
with, and I am not drawing upon my imagination in the least when 
I make this statement. Why, when you see strong, able-bodied 
men pulling wagons in the street you can quickly deduce the fact 
that a horse is considered more valuable than a man, according to 
the foreign standard, and that human intelligence counts for noth- 
ing. This country has arrived at the parting of the ways. It must 
either go backward or go forward. It must find places for the 
million male emigrants, many of them skilled artisans, coming to 
it annually, or it must turn them back; and with our abundant and 
almost unlimited resources we will not do the latter, I am sure. 

We have for the past fifty years depended upon our export of 
food stuffs, but even to-day this situation is changed, and now our 
exports of manufactures exceed our exports of food stuffs, and 
as our population increases we will more and more require these 
food stuffs to supply our home market. Therefore, there is but 
one avenue open, the industrial. To-day we have a great deal of 
idle labor in this country, and there is absolutely no need of the 
existence of this deplorable condition. It is true that the demand 
at home is not sufficient to keep this labor employed, but why must 
we depend upon home consumption? 

Every business man knows that the cost of production steadily 
decreases in a properly organized factory as the production in- 
creases, so that if we can operate our factories to their fullest 
capacity we immediately accomplish two beneficial results : First, 
we reduce the cost of production, thus lowering the cost of living; 
and second, we keep labor employed at good wages ; for after a 
specified production is reached the overhead increases very little, 
and labor can be better paid by reason of the increase of produc- 
tion and still the cost of production be decreased. Therefore, if I 
am right — and I do not think any one will dispute it, for to in- 
crease our output is what we are all straining and striving to ac- 
complish — then the only difficulty is to find a market for this in- 



NATIONAL BUSINESS CONGRESS 319 

creased output. Advertising has been successfully resorted to, and 
sending salesmen into new territory has also been a means toward 
this desired end, but always in America, and to-day we are all doing 
the same thing, and consequently it is costing us more to do business 
than formerly. 

Now, why not take a short cut to prosperity? I claim the 
foreign route is the one that is the least covered and affords by far 
the greatest opportunities, and that if we would reverse the scheme 
of shutting down valuable plants and throwing them on the scrap 
heap to reduce production, or combining interests and reducing the 
production to meet a certain demand, and agreeing upon a price not 
governed by the actual cost of production, but by a so-called gentle- 
men's agreement, and if we would start up all these plants that 
took genius and time to build up, and go after the foreign business, 
every factory would be so busy filling orders that it would not be 
necessary to agree upon prices in order to keep some factory that 
was not busy from cutting them. 

With no apparent effort, except in a few lines that have built 
up a profitable export business, we gained about three hundred mil- 
lion dollars in our exports in the fiscal year 1911 over 1910, ex- 
porting in 1911 over two billion dollars. To give you a few sta- 
tistics : In manufactures ready for consumption there were 
exported in the year 1901 a little over three hundred million dollars 
and this year about six hundred million dollars. In boots and shoes 
in 1901 five and a half million dollars, and this year thirteen million 
seven hundred thousand dollars. In builders' hardware and tools, 
in 1901, nine million dollars, and this year seventeen million dollars. 
You may consider this a good showing, but I cannot agree with you 
if you do, for the opportunity is so great that this increase, al- 
though large, is nothing to what we could get if we would only go 
after it. Now. this increase took place despite the fact that our 
wage scale was so much higher. 

Plants for manufacturing American agricultural machinery are 
now in operation in foreign countries. These plants, of course, are 
owned by Americans, yet our exports of American-made mowers 
and reapers alone last year were greater than that of all agricultural 
implements ten years ago. Ten years ago we exported two million 
dollars of plows and cultivators, while last year we exported nine 
million dollars. In 1902 we exported one million dollars in automo- 
biles, last vear thirteen million dollars. In the last fiscal year the 



320 NATIONAL BUSINESS CONGRESS 

gain in this line alone was three and a half million dollars. Large 
increases were shown in the export of photographic goods, mineral 
oils, electrical appliances and machinery, typewriters, sewing ma- 
chines, cash registers, metal working machinery, pipes and fittings, 
iron and steel work. Within ten years the export of copper bars, 
pigs and ingots has increased from about forty million dollars to 
about one hunded million dollars. All this in spite of the fact that 
except with a few articles there is still a tenacious clinging to the 
home market, still a great diffidence as to over-sea commerce. 

A great deal of the increase of our export business is due to 
the demand that has been created abroad by Americans living over 
there or visiting there, and through advertising, but hardly through 
any great effort on our part. 

If the proper effort were put forth in the first instance to se- 
cure foreign trade, there would be no necessity for holding con- 
gresses, when conditions are bad,, to ascertain the causes of the 
depression. Note the activity of the foreign exporters since the 
canal we are digging is nearing completion. Germany and Eng- 
land especially are making vast preparations. They are both build- 
ing new ships to put on that route as soon as the canal is opened, 
ships of double and treble the tonnage of those now in use, because 
they realize the possibilities of the situation, and they know that 
their trade will largely increase when we finish the canal which it 
now appears we are building for their benefit. We witness all these 
activities to steal the trade right under our very noses, and do not 
retaliate. The Germans, the English, the French and the Belgians 
send their traveling men all through South America and we make 
no effort to compete with them, but continue the fight for trade in 
North America, constantly fighting amongst ourselves and cutting 
the throats of our own manufacturers instead of going after our 
competitors from across the sea. Why, the European buyers have 
to come to us for our goods instead of our going to them, and this 
in a large measure is responsible for our increase of exports. When- 
ever our manufacturers are ready to go after the foreign trade it 
will not be difficult to compete with the foreign manufacturers and 
sell goods right at their very doors. But we must do more than 
wait for the buyers to come to us. We must create proper banking 
facilities and establish agencies and branch houses just as the Euro- 
pean manufacturers have so successfully done. 



NATIONAL BUSINESS CONGRESS 321 

In order to allay any possible fear in your minds as to our 
facilities for securing accurate financial reports upon which to 
base a credit, I am glad to be able to state that the commercial 
agencies in our country are splendidly equipped for this service. 
One of them has seventy-one branch offices abroad, each one in 
charge of a trained American, and this agency supplied 3,112 re- 
ports to America this year, and the other large agency is affiliated 
with the most reliable agency abroad, so that both of these concerns 
can furnish a report on a foreign corporation almost as quickly as 
they can on one at home, and equally as reliable. These agencies 
also have lists of importers which they can furnish to those who 
are interested in exporting, so that these lists may be circularized, 
if desired. Another matter that might relieve our American busi- 
ness men, is the fact that the percentage of solvency abroad is 
greater than in America. 

The percentage of exports of other countries in proportion to 
the volume of their manufactures far exceeds that of the United 
States, even with our vastly increased facilities. In a report of 
the International Harvester Company of September 1st of this year, 
the President says : "The total volume of business at this date is 
slightly in excess of what it was at this time last year. The foreign 
trade shows a substantial increase." Now what would the Inter- 
national Harvester Company do without its foreign business? But 
if you go abroad and note the effort that it makes to get this busi- 
ness and the way it is handled, you would not wonder at its vast- 
ness. I asked a manufacturer of typewriters quite recently what 
per cent of output he sold abroad. He told me over 33 1-3 per cent. 
He said his company would not know what to do if they lost their 
foreign business, which they were steadily increasing. He also told 
me that it took no greater effort to get the business over there than 
in this country. 

Europe needs America and America needs Europe. She stands 
ready to take our surplus and pay us good prices for it. Why, 
many things that we produce in abundance she does not even know 
we have for sale ! 

To-day we sell many shoes and leather specialties, typewriters, 
kodaks, graphophones, sewing machines, razors, drugs, automobiles, 
farm implements, cotton goods, cash registers, pianos, guns, skates, 
fountain pens, bicycles, corsets, watches, billiard tables, linotype 
and printing machines, slot machines, hardware, furniture, filing sys- 



322 NATIONAL BUSINESS CONGRESS 

terns, lithographing presses, dynamos and electrical apparatus, en- 
gines, wagons, trucks, gas fixtures, cigars, laundry machinery, fire 
extinguishers, scales, machine tools, vacuum cleaners, elevators, pe- 
troleum tanks, picture frames and mouldings, tin goods, rubber 
tires, savings banks, surgical supplies, paints, chemicals, zinc, rail- 
road cars, dental goods, plumbing supplies, stoves, iron and steel 
manufactures, collars, shirts, ready-made clothes, whiskey and food 
stuffs. You may judge from this list what a variety of commodi- 
ties we now furnish to other nations. Still in most of these lines 
the surface alone has been scratched. With the same effort that the 
manufacturers of these goods make to dispose of them in this 
country, they can double, treble, and even quadruple the business 
even on these lines. There are many other lines that we export in 
small quantities that we could do a big business on if we went after 
it. There is a great demand for American made goods, and 
the four hundred thousand travelers who annually go to Europe 
wearing and talking about our manufactures are an advertisement 
for these goods that is more effective than if we spent millions of 
dollars in magazine and newspaper advertising over there. And 
yet we do not follow up this great advantage. It is not very long 
since our life insurance companies went after the foreign business, 
and what is the result? The increase abroad is phenomenal, show- 
ing conclusively that when Americans go after business in the right 
way, it is not difficult to get it. 

I think I have already dwelt at too great length upon the neces- 
sity of extending our over-sea commerce. I believe that what you 
would like to know is what I propose as a means to gain this end. 
I propose that the various manufacturers of this country who have 
anything to sell that can be exported form a national organization 
and this organization select as a general manager a high-grade, ex- 
perienced organizer. After he has gathered together all the manu- 
facturers who will join this movement, he can then proceed to 
Paris, where I am sure suitable arrangements can be made for a 
proper site for a series of buildings for permanent exposition pur- 
poses. From the investigation I made abroad the government of 
France will, I am sure, welcome such an organization, and I believe 
that all goods for this exhibit would be admitted free of duty by 
France. The American Chamber of Commerce in Paris, a repre- 
sentative organization of Americans living abroad, would aid us in 
this movement, and their support would be of material help. 



NATIONAL BUSINESS CONGRESS 323 



The next move would be the leasing of such space as would be 
required by the various exhibitors who wish to engage in the export 
trade. This space, of course, could be leased at a certain square 
foot rental per annum, and the amount realized from this rental 
must, of course, be sufficient not only to maintain the exhibit in a 
proper way, but to leave a surplus to take care of the annual retire- 
ment of the bonded indebtedness that would be created in erecting 
the required buildings. I am sure that the demand for space would 
far exceed the supply. But in order to demonstrate whether or not 
my theory be correct no obligation need be entered into beyond the 
employment of a general manager until it were fully shown that 
there were enough manufacturers to form an organization and put 
up the money to erect the buildings and take space in sufficient 
amount to defray the expense of maintenance and retirement of 
the bonds. Space could be leased separately or jointly, so that a 
small exhibitor of any size could be accommodated. Small ex- 
hibitors could also join with others in the division of the expense 
of a traveling man or representative of the exhibit, so that each 
exhibitor would have a representative. Thus it would not be merely 
an exhibition, but an organized selling campaign, for an exhibit 
without a thoroughly organized selling force would be of little aid. 
We already have such an exhibit in the large number of travelers 
who go abroad wearing and talking about what we make and sell. 
American manufacturers who already have a selling force and 
agencies abroad would, I am sure, join this organization gladly. 

The reason that I select Paris as the place for this exhibit is 
that it is within a night's ride of two hundred million people. Not 
only do many of these people visit Paris, but almost every one who 
goes abroad from South America and other countries visits Paris, 
and I believe it is unquestionably a fact that such an exhibit in 
Paris would be. seen by more people than if it were located in an> 
other city. The government of France and the municipality of 
Paris do much to attract visitors to the city. Besides, the expense 
of conducting a selling campaign would be less from Paris than 
from any other point, as Paris is nearer the center of population 
abroad. I think it would cost us less to send traveling men to Paris 
and then have them travel abroad than it would cost to send them 
from New York to California. A man traveling from Paris could 
conveniently and at a small expense visit France, England, Ger- 
many, Russia, Belgium, Spain and many other European countries 



324 NATIONAL BUSINESS CONGRESS 

which are large consumers. After this exhibit is successfully 
launched a like exhibit could then be opened at Buenos Ayres, the 
capital of Argentina. 

I will not attempt to work out the details of this plan. There 
are many men more capable of doing this, but I only want to add in 
conclusion that the war from to-day on is not one of armies or 
navies, but one of commerce. The brains of the country will be 
engaged principally in commerce, and that nation which is the lead- 
ing commercial nation will be the greatest nation in the world. We 
have that opportunity. It is knocking at our doors. Will we close 
them, or will we open them wide and welcome it with open arms, 
and never rest until we have woven a commercial belt that will 
extend around the world and the products of our manufacturers 
be found in every household? If we do not do this, other nations 
will. Manufacturers of America, awake, and get together, and let 
the fires of industry in America burn so brightly that the rising 
smoke and flame may be seen plainly from every corner of the 
civilized world. This is your opportunity. RISE TO IT! (Ap- 
plause.) 



NATIONAL BUSINESS CONGRESS 325 



Accredited Delegates to the National Business Congress 



DEPARTMENT OF STATE— WASHINGTON. 
Honorable John Ball Osborne. 

NATIONAL ASSOCIATION OF MANUFACTURERS. 

William L. Brown, Chicago. Herbert E. Miles, Racine, Wis. 

J. G. Battelle, Columbus, Ohio. Albert H. Mulliken, Chicago. 

C. S. Brantingham, Rockford, 111. O. H. Morgan, Chicago. 

J. P. Bird, New York City. A. C. Marshall, Dayton, Ohio 

George S. Boudinot, New York City. A. Parker Nevin, New York City. 

J. E. Bullock, Chicago. D. M. Parry, Indianapolis, Ind. 

W. H. French, Chicago. Walter B. Pearson, Chicago. 

Clarence S. Funk, Chicago. W. E. Ritchie, Chicago. 

Irving T. Hartz, Chicago. T. M. Sechler, Moline, 111. 

Charles M. Jarvis, New Britain, Conn. O. H. L. Wernicke, Grand Rapids, 
L. D. Kellogg, Chicago. Mich. 

H. H. Lewis, New York City. John Kirby, Jr., Dayton, Ohio. 
Charles D. Mitchell, Chattanooga, Tenn. 

NATIONAL IMPLEMENT AND VEHICLE ASSOCIATION. 

James A. Carr, Richmond, Ind. Henry M. Wallis, Racine, Wis. 

F. C. Johnson, Springfield, Ohio. H. N. Wade, Batavia, 111. 

E. W. McCullough, Chicago. W. H. Stackhouse, Springfield, Ohio. 

THE NATIONAL BUSINESS LEAGUE OF AMERICA. 

O. B. Bannister, Muncie, Ind. A. Hirshheimer, La Crosse, Wis. 

H. B. Bannister, Muncie, Ind. Dr. Samuel MacClintock, Chicago. 

Charles B. Boothe, Los Angeles, Cal. Henry M. Wallis, Racine, Wis. 
Elliott Durand, Chicago. Alexander H. Revell, Chicago. 

E. Allen Frost, Chicago. H. W. Hoole, Muncie, Ind. 

NATIONAL PAINT, OIL AND VARNISH ASSOCIATION. 

T. L. Sulzberger, Chicago. John Von Pein, Chicago. 

George E. Watson, Chicago. 

UNITED STATES BREWERS' ASSOCIATION. 

Percy Andreas, Chicago. Gustav Pabst, Milwaukee, Wis. 

Rudolf Brand, Chicago. Charles J. Vopicka, Chicago. 

E. A. Faust, St. Louis, Mo. 

AMERICAN EMBASSY ASSOCIATION. 

E. Clarence Jones, New York City. 
Frederick Townsend Martin, New Honorable Frank D. Pavey, New 
York City. York City. 

NATIONAL MERCHANT MARINE ASSOCIATION. 

James L. Ewell, New York City. 

NATIONAL FOUNDERS' ASSOCIATION. 

O. P. Briggs, Minneapolis, Minn. A. E. McClintock, Detroit, Mich. 

Otto H. Falk, Milwaukee, Wis. Staunton B. Peck, Chicago, 111. 

F W. Hutchings, Detroit, Mich. Frederick Robinson, Racine, Wis. 



326 NATIONAL BUSINESS CONGRE SS 

THE WHOLESALE SADDLERY ASSOCIATION OF THE UNITED 

STATES. 

T. F. Hopkins, Chicago. R. E. Rinehart, Chicago. 

Albert Kuhlmey, Chicago. 

AMERICAN MANUFACTURERS' EXPORT ASSOCIATION. 

A. E. Ashburner, Cleveland, Ohio. Leonard S. Smith, Cincinnati, Ohio. 

R. W. Ashcroft, Racine, Wis. H. J. Turner, Buffalo, N. Y. 

W. B. Campbell, New York City. Henry T. Wills, New York City. 

Frederick Glover, Minneapolis, Minn. Spenser S. Weart, Canton, Ohio. 
G. M. Lingham, Dayton, Ohio. P. D.' Wright, Erie, Pa. 

William C. Redfield, New York City. 

DETROIT BOARD OF COMMERCE. 

George H. Barbour, Detroit, Mich. Arthur L. Holmes, Detroit, Mich. 

Hon. Edwin Denby, Detroit, Mich. 

THE CHICAQO ASSOCIATION OF COMMERCE. 

William H. Bush, Chicago. George Frederic Stone, Chicago. 

Frederick A. Delano, Chicago. Frederick H. Scott, Chicago. 

Thomas J. Hyman, Chicago. G. Kenneth Sage, Chicago. 

A. W. Holmes, Chicago. Irving T. Washington, Chicago. 

Herman H. Kohlsaat, Chicago. 

MONTPELIER (VERMONT) BOARD OF TRADE. 

Theron F. Colton, Montpelier.' Marshall L. Wood, Montpelier. 

James S. Haley, Montpelier. 

' NATCHEZ (MISS.) CHAMBER OF COMMERCE. 

C. R. Byrnes, Natchez, Miss. S. H. Lowenburg, Natchez, Miss. 
Andrew G. Campbell, Natchez, Miss. K. Lehmann, Natchez, Miss. 

L. E. Davis, Natchez, Miss. Judge Van Voorhees, Natchez, Miss. 

James K. Lambert, Natchez, Miss. 

THE WILMINGTON (DELAWARE) BOARD OF TRADE. 

W. Griscom Coxe, Wilmington, Del. Harvey Holstein, Wilmington, Del. 
Charles S. Gawthrop, Wilmington, Del. 

ILLINOIS MANUFACTURERS' ASSOCIATION. 

George W. Neidringhaus, Granite Charles Piez, Chicago, 111. 

City, 111. Burton F. Peck, Moline, 111. 

U. G. Orendorff, Canton, 111. Thomas J. Hyman, Chicago. 

P. A. Peterson, Rockford, 111. 

WISCONSIN BANKERS' ASSOCIATION— MILWAUKEE. 

A. Hirshheimer, LaCrosse, Wis. George D. Bartlett, Milwaukee, Wis. 

Charles C. Brown, Kenosha, Wis. 

PEORIA (ILL.) ASSOCIATION OF COMMERCE. 

D. H. Bethard, Peoria. G. W. Perry, Peoria. 

MERCHANTS' AND MANUFACTURERS' ASSOCIATION OF 

BALTIMORE. 

John R. Bland, Baltimore, Md. James M. Easter, Baltimore, Md. 

Walter C. Nimmo, Baltimore, Md. Thomas G. Boggs, Baltimore, Md. 

Henry B. Wilcox, Baltimore, Md. 



NATIONAL BUSINESS CONGRESS 327 

BOARD OF TRADE OF THE CITY OF CHICAGO. 

Z. P. Brosseau, Chicago. Walter C. Hately, Chicago. 

W. H. Colvin, Chicago. A. O. Mason, Chicago. 

Walter Fitch, Chicago. 

MANUFACTURERS' AND SHIPPERS' ASSOCIATION OF ROCKFORD. 

C. S. Brantingham, Rockford, 111. 
MANUFACTURERS' ASSOCIATION OF KENOSHA. 

George W. Yule, Kenosha, Wis. A. H. Lance, Kenosha, Wis. 

M. F. Yule, Kenosha, Wis. 

MERCHANTS' AND MANUFACTURERS' ASSOCIATION OF 

MILWAUKEE. 

W. G. Bruce, Milwaukee, Wis. 

THE BOARD OF TRADE OF JERSEY CITY. 

Austen Colgate, Jersey City, N. J. Robert E. Jennings, New York City. 

THE CITIZENS' COMMERCIAL ASSOCIATION OF FREEPORT. 

James R. Cowley, Freeport, 111. W. C. Jencks, Freeport, 111. 

N. F. Cobb, Freeport, 111. 

THE CLINTON MANUFACTURERS' AND SHIPPERS' ASSOCIATION. 

G. W. Dulany, Jr., Clinton, Iowa. 

INDUSTRIAL AND COMMERCIAL CLUB OF JANESVILLE. 

U. L. Carle, Janesville, Wis. George F. Kimball, Janesville, Wis. 

J. A. Craig, Janesville, Wis. Allen P. Lovejoy, Janesville, Wis. 

Azel C. Hough, Janesville, Wis. 

THE CHAMBER OF COMMERCE OF NEW HAVEN. 

Major Louis E. Stoddard, New Colonel I. M. Ullman, New Haven, 

Haven, Conn. Conn. 

John T. Manson, New Haven, Conn. 

DULUTH COMMERCIAL CLUB. 

W. M. Prindle, Duluth, Minn. 

BOX BOARD MANUFACTURERS' ASSOCIATION. 

Charles R. White, Chicago. 

MANUFACTURERS' ASSOCIATION OF RACINE. 

Steven Bull, 2nd, Racine, Wis. O. W. Johnson, Racine, Wis. 

Warren J. Davis, Racine, Wis. W. C. McMahon, Racine, Wis. 

J. W. Gilson, Racine, Wis. Frank G. Bolles, Racine, Wis. 

BUFFALO (N. Y.) CHAMBER OF COMMERCE AND MANUFACTUR- 
ERS' CLUB. 

Jacob C. Dold, Buffalo, N. Y. 



Commendatory letters were received from business organizations all over 
the country, promising hearty co-operation. 



328 



NATIONAL BUSINESS CONGRESS 



Committees of the National Business Congress 



GENERAL COMMITTEE 
GEORGE W. SHELDON, Chairman 
Henry C. Lytton John W. Kiser Albert B. Dick 

Charles A. Stevens Charles J. Vopicka Ellsworth W. McCullough 

Rudolph Ortmann La Verne W. Noyes Albert E. Ziehme 

Horace E. Horton Mather Smith William P. Ketcham 

Ward W. Willits Herman H. Hettler 



Louis Mohr 



CREDENTIALS COMMITTEE. 

A. VOLNEY FOSTER, Chairman 

Noble Crandall Charles J. Stromberg 

Thomas C. Dennehy 

RESOLUTIONS COMMITTEE. 

E. ALLEN FROST, Chairman 



James W. Nye 



ENTERTAINMENT COMMITTEE. 
FREDERICK BODE, Chairman 

Francis T. Simmons 
Harry J. Powers 



A. Henry Mulliken 



James H. Hiland 
Fred S. James 



BANQUET 



INVITATION COMMITTEE 

PHILETUS W. GATES, Chairman 

William O. Coleman Alfred L. Baker 

Walter Fitch Silas J. Llewellyn 



Edgar A. Bancroft 
Charles F. Gunther 



BANQUET COMMITTEE 
GEORGE W. DIXON, Chairman 

Frederick H. Brennan George Lytton 



Elliott Durand 



G. A. Edward Kohler 



RECEPTION COMMITTEE 



GEORGE M. REYNOLDS, 



Cyrus H. McCormick 
Samuel Insull 
John W. Scott 
Bernard E. Sunny 
Homer A. Stilwell 
Charles M. Hewitt 
Orson Smith 
Milton W. Kirk 
John A. Spoor 
Albert J. Earling 



Julius Rosenwald 
Norman W. Harris 
James B. Forgan 
William L. Brown 
Laurence A. Carton 
Frederic W. Upham 
Charles G. Dawes 
Eugene J. Buffington 
Adolphus C. Bartlett 
Alexander H. Revell 



Chairman 

Harry A. Wheeler 
Clyde M. Carr 
Frederick Bode 
James W. Nye 
Benjamin J. Rosenthal 
Charles Piez 
Frederick C. Austin 
Henry M. Wallis 
Ulysses G. Orendorff 
William H. Stackhouse 



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